Many Americans are feeling the economic hardships and are driven into bankruptcy for one reason or another. While bankrupty is on the rise, many others still do not understand what is bankruptcy or the procedure of filing bankruptcy. In this article, I will try to clear up any unknowns you might have about bankruptcy.
The first step to file for bankruptcy is to attend a credit counseling course with an approved credit counseling agency. To make it easy for everyone, most credit counseling agencies render classroom learning or online learning at your own pace. The government wants to make sure that everyone who is filing for bankruptcy attends the credit counseling course so that he/she knows how to oversee his/her money in the future. It will teach you how to create a budget, and advise you on numerous financial instruments such as 401k, IRA, mortgage loans and whole lot of others. Credit counseling consists of 2 courses, a pre-bankruptcy and a post-bankruptcy course. This is the pre-bankruptcy course. Part of the bankruptcy petition that you will be submitting includes the certificate given to you after the pre-bankruptcy credit counseling course.
The bankruptcy procedure does not start until you have submitted your petition to the court system. Your bankruptcy petition would enclose these documents (along with the intention to file Chapter 7 or Chapter 13 bankruptcy):
Most recent tax return
Schedules of assets and liabilitiesBank statements
Retirement plan statements
Other sources of income
All creditors and the debt
Associated filing fees
Statement of financial affairs
Pre-bankruptcy credit counseling proof
Last 60 days of paystubs
In order to be qualified to file Chapter 7 bankruptcy, you will now have to pass the “means test”. Means test is performed to test if your income is below or above the state’s median income. If your income is above the state’s median income level, then you only option is to file Chapter 13 bankruptcy. Whereas if your income is at or under state’s median income, you will be eligible to file Chapter 7 bankruptcy. Not many people would want to file Chapter 13 bankruptcy, which is also known as the repayment plan. Chapter 13 forces you to pay back a percentage of the debt distribute over a course of 5 years.
You will be assigned a bankruptcy trustee and the date of your 341 meeting 7-10 days after you have submitted your bankruptcy petition. 341 meeting is usually scheduled within 30 days after you have submitted your bankruptcy petition. 341 meeting is conducted by the trustee whose duty is to make sure that all the documents presented are complete and spot on. The creditors are informed of the 341 meeting and they can present their case to the trustee if they choose to. Since most creditors do not show up at the 341 meeting, if by chance the creditors do show up, they are mostly likely there to dispute your debt discharge.
After the 341 meeting, you are essentially in a holding pattern for the next 45-60 days. The creditors will be given the chance within this 45-60 days to file any protest against your bankruptcy discharge. If no creditor objects to the debt discharge, the bankruptcy judge assigned to your case will issue the discharge papers. When you are issued the bankruptcy discharge papers, no creditors can ever come after you for the debt repayment, hence making you debt free.
Given the massive number of bankruptcy filings in the last few years, you should expect your case to be settled from the start to finish in about 4-6 months. If you are looking for additional information on bankruptcy, please visit our website at tofilebankruptcyornot.com.
Steve Sanchez has recently overcome the economic depression of 2008-2009 by declaring bankruptcy. Even though bankruptcy has devastated Steve financially and emotionally, Steve has rebuilt his businesses in the last 6 months and he has not looked back since.One of his project is to educate people on bankruptcy. Having gone through the ordeal himself, he has first hand knowledge of the pros and cons of filing for bankruptcy protection. Please visit his site http://ToFileBankruptcyOrNot.com if you want additional information regarding bankruptcy.