What To Expect Once You Apply For Bankruptcy

Last year over a million and a half Americans declared bankruptcy. However, despite the freedom of a fresh financial start, many people find the thought of bankruptcy intimidating, especially if they don't know what to expect. The more informed you are about the bankruptcy process the less stress you'll feel.

Step One

After meeting with a bankruptcy lawyer, and providing the necessary information, your attorney will file the paperwork with the Bankruptcy Court. Creditors are advised by the court that a petition has been filed on your behalf, and a meeting of creditors is scheduled. Most creditor legal action will be halted as soon as you file.

Step Two

Within a few weeks, you will receive notification of the date, time and location of your bankruptcy hearing, also referred to as the meeting of the creditors or the 341 meeting. You MUST attend this hearing or your case could be dismissed. If a conflict in scheduling occurs, consult your attorney or the bankruptcy court clerk as early as possible.

At this meeting, the court appointed trustee will verify that you are eligible for bankruptcy and that your paperwork is accurate and in order.

In a Chapter 7 bankruptcy, it's the trustee's responsibility to locate any unprotected assets that you may have, liquidate them and divide the proceeds among your creditors.

In a Chapter 13 bankruptcy, the trustee oversees the payback plan arrangements and distributes payments.

You should arrive about fifteen minutes early, bring a state issued photo I.D., your social security card and the notice you received from the court. Your attorney will be there as well as other people declaring bankruptcy and their lawyers. Sometimes creditors may attend as well, but merely for informational purposes and never in an adversarial position.

When your turn arrives, the trustee will call you forward and ask you a few questions such as:

  • Did you read the schedules before signing?
  • Did you list all of your debts and assets?
  • Are you expecting to inherit money shortly?
  • Have you transferred any property or assets?

This interview should take about five minutes for a Chapter 7 and a little longer for Chapter 13. After you've spoken to the trustee, you are free to leave.

Step Three

If you're filing a Chapter 7, there is little else you need to do unless the bankruptcy trustee requests additional information. In this case, you will want to get any documentation to the court as quickly as possible. Otherwise, in approximately 60 - 90 days following your hearing, you will receive official discharge papers.

If you're filing a Chapter 13 bankruptcy, you will receive your discharge order after you have finished your court arranged payment plan.

Either way it is important to keep your discharge paperwork in a safe place. This is proof that you've cleared your previous debts. You may be required to produce it in the future when applying for home or auto loans. It is also common for the credit reporting bureaus to list debts as current and outstanding when they should have been discharged in the bankruptcy. Your discharge paperwork will allow you to speedily amend such errors.

The choice to declare bankruptcy is often agonizing, but once the decision has been made, know that the process will be quick. You'll be treated with respect and consideration. And most importantly, you will be getting a second chance.

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