The first step is to contact me for a free consultation to see if you need to file bankruptcy and, if so, if you’re eligible for chapter 7. Eligibility for chapter 7 is determined by the means test, which compares your total average gross household income for the last 6 months. To do that, I will need pay stubs or, if they’re not available, accounting records and/or bank statements. If your income is higher than the state median, then I look for certain allowable deductions from income to see if your adjusted income is lower than the state median. If it is, then you can file chapter 7. If not, I will evaluate your eligibility for chapter 13 or 11. However, if your debts are primarily business debts (or, more accurately, they are not primarily consumer debts), then you don’t need to worry about the means test regardless of how high your income is.
Once/if I’ve determined you can file chapter 7, I will give you the logon information and password for a secure website that will ask you to enter detailed information about your financial situation, such as what your assets and liabilities are, property transfers, gifts, etc. When that’s been completed I will download your information into my bankruptcy software and begin preparing and reviewing your bankruptcy petition and schedules.
While I’m doing that, you need to take an online debt counseling course from a list of approved agencies. When you’re done with that course, you will be issued a certificate of completion from the agency that you need to forward to me because it has to be included with the paperwork you file in your bankruptcy case.
Once I have created your petition and schedules you will review them carefully and initial the bottom of each page that you believe is correct. You will let me know of any pages that need corrections of any kind, after which I will correct them and resubmit them to you for your approval and initials. Once all the pages have been initialed by you, I will file them with the bankruptcy court online.
Within 7 days after filing the case I must send your tax returns for the last 2 years to the trustee.
At the time the case is filed, we will find out two important things: 1, who the trustee is; and 2, when the meeting of creditors will be.
The trustee is a randomly appointed official who will review your eligibility to file chapter 7, and check your petition and schedules for completeness. The trustee’s job is to look for assets to sell for profit and then distribute the profit on a pro rata basis to your creditors. The trustee’s power to do so is limited by the exemption system, which permits you to claim certain cash values for each asset. If the trustee sells an asset, you must be paid that cash value and the remainder goes to the creditors. However, a liquidation of assets rarely, rarely happens either because the exemptions usually claim the majority of the value of the asset, or the cash that would go to creditors would be so minimal that it wouldn’t be worth the time, effort and expense for the trustee to liquidate it.
The meeting of creditors is a public meeting at creditors can, but rarely, if ever, show up. It takes about 5-10 minutes and consists of a recorded oral interview of you by the trustee. The trustee will ask you all of the same questions that I will have asked you by that time: are your schedules complete, are there any mistakes of which you are aware, did you list all of your assets, liabilities, and income, have you sold, bought or otherwise transferred any significant assets in the last 2 years, do you expect a large tax refund this year, do you expect a significant change in your income in the near future, etc.? Your answers will be under oath and subject to the penalty of perjury under federal law. I will be present with you at the interview. Most meetings of creditors are completed painlessly and without a hitch. There are no trick questions and, unless you’ve lied to me or the trustee, there won’t be any problems. You must take your social security card or passport and driver’s license to the meeting of creditors.
After the meeting of creditors, you must take another financial counseling course, which you will most likely be able to take from the same agency from which you took your pre-filing course. The agency will issue you another certificate of completion which you must forward to me.
The next step is to simply wait….and wait, and wait. After the meeting of creditors, the court will enter an order discharging your debts. A discharge of debts means your creditors of unsecured debts cannot ever attempt to collect, in or out of court, those debts again. About a month or so later, the court will enter an order closing your case.
The entire process takes about 9-12 months once your case has been filed. How soon I can file the case to begin with depends on how quickly you complete the online questionnaire and provide any documents that I request. Slow or incomplete responses by you will make the pre-filing planning stage take longer.
