Filing Personal Bankruptcy

What to Expect

Probably the most difficult financial decision someone can be faced with is whether to file for bankruptcy. Before making a final decision every alternative to bankruptcy must be completely ruled out. Having done so, there are basically two types of filing for individuals under bankruptcy law. There is Chapter 7 and Chapter 13. Chapter 7 is a fresh start under bankruptcy laws and will eliminate a filer's unsecured debt such as credit cards and personal loans. Essentially the court will wipe the slate clean of this kind of debt. Chapter 13 requires the filer to pay a prearranged portion of their debt on a court approved payment schedule. Which filing is appropriate is determined by the current amount of disposable income left after normal living expenses.

Will A Filer Lose Their Home?
Usually the biggest question about consumer bankruptcy is what, if any, assets will be lost. Well, with a chapter 13 filing most filers are allowed to keep their property by agreeing to pay a percentage of their debts. In Chapter 7 the filer's assets are supposed to be liquidated and all non-exempt property sold to pay outstanding debt. The big question is: what is exempt and what is non-exempt property in a chapter 7 personal bankruptcy? This happens to be state specific. How much property, including a residence, a filer is allowed to keep depends on state bankruptcy law.

The Petition
Officially filing personal bankruptcy begins as soon as a petition is filed with the bankruptcy court in the filer's local jurisdiction. Most of the time, as is highly recommended, a filer hires an attorney to assist with the filing. One can file a bankruptcy petition "pro se" without an attorney. However, it is highly advisable to hire an attorney just to make sure all of the forms are completed accurately and that all assets involved are protected as well as possible. Questions of bankruptcy fraud can be minimized with legal representation.

The Trustee
Once the petition is filed the judge will assign a trustee and a 341 meeting of the creditors will be scheduled. Although the filer is required to attend this meeting the creditors are not. At this meeting, usually the only one the filer is required to attend, the trustee will question the filer under oath and the meeting will be court recorded. Unless there are special circumstances this will be the last time the filer will have to appear.

Finalizing the Case
At conclusion of the 341 meeting the creditors will have thirty days to file a property exemption objection and an additional thirty days to object to the discharge of debt if the filing is a Chapter 7. In a Chapter 13 filing the creditors can object to the court appointed payment plan. The discharge of debt will not be complete in a Chapter 13 filing until the payment plan is completed which can take up to five years. As soon as the payments are complete the debt discharge is granted and the case is closed.

This Information is Not Legal Advice
Do not rely on this information to make decisions regarding your own bankruptcy claim. There is no substitute for professional legal advice and for consulting a licensed attorney in your state when filing personal bankruptcy.

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