STEP 1:     Consult with a credit counseling expert or attorney

First, review your options with a credit counseling expert or a board certified attorney.  Consumer Credit Counseling Service is a national non-profit organization that will provide a comprehensive analysis of your financial situation, and make recommendations to you regarding your debt. Another good advisor is a board certified bankruptcy attorney who can also provide you with a comprehensive look at your financial circumstances and make helpful recommendations regarding your options.

STEP 2:     Retain a board certified bankruptcy expert

Second, if you decide that you are going to file bankruptcy, then your next step is to hire a board certified bankruptcy attorney. This involves calling the attorney and setting up an appointment to discuss your financial situation.  In a joint case, both husband and wife should attend the appointment.  After examining your ability to pay, you and your attorney can decide the type of bankruptcy that will best suit your needs. At the initial consultation, you will need to bring the following: all of your bills, the most recent and current wage statement(s) from your employer, and your gross income as reported on your federal income tax return for the previous three years prior to the year in which you are filing bankruptcy. If your year of filing is 2002, then your tax returns for 1999 & 2000 & 2001 (if they are available) need to be brought to your appointment.

STEP 3:     Prepare the petition, schedules and statement of financial affairs

Your attorney will prepare a bankruptcy petition to file with the court.  The petition states the type of bankruptcy that you wish to file, and it requests relief from the court.  In addition, the attorney and you will prepare schedules of all of your assets, liabilities, income and other matters.  In Chapter 13, a plan for repayment will be prepared.  A statement of financial affairs will then be prepared as proof of your need for relief. The attorney will assist you in preparing the paperwork.

STEP 4:     Preparing a Chapter 13 plan

Along with the assistance of your attorney, you will develop a Chapter 13 plan to pay your debts.  The plan is filed with the court at the time of the filing of your schedules, statements and financial affairs.  The plan will propose to repay all of your priority claims such as taxes, child support and other priority debts and may include home mortgage arrearages, secured claims such as an automobile loan and may include repayment on all or a portion of your other unsecured obligations.

You will be required to meet with a Bankruptcy Trustee (and any creditors who may wish to attend) in what is commonly called a “341 Meeting.” Any creditor who wishes to appear at the meeting may appear and ask you questions about your financial affairs and circumstances.  The trustee will examine the petition, the statement of financial affairs and all or your schedules to determine if you own any non-exempt property that could be sold. In the event that you own no non-exempt property or in the event that the trustee considers the asset to be burdensome, then the trustee will either declare the case to be a no-asset case or abandon the burdensome asset and declare the case to be a no asset case.  Please keep in mind that the decision as to the exemptions on the assets is determined by the court and not by you or your attorney. The trustee or the creditors may challenge your exemptions.  The court will decide any exemption disputes.

In a Chapter 13 case, if you file one, then the trustee will meet with you and your attorney to review your Chapter 13 plan.  The Trustee will also perform the same duties as a Chapter 7 Trustee, except that the Chapter 13 Trustee will not liquidate non-exempt property. The Chapter 13 trustee will verify the information that you have provided in the schedules and statement of financial affairs and will determine whether the plan accurately represents your ability to re-pay your net disposable income.  The trustee will also determine whether the repayment schedule is reasonable and whether you can perform under the plan.  Creditors are allowed to attend the meeting and ask any questions about your finances and your financial circumstances, including the feasibility of the plan, and the amount of the plan payment.

STEP 6:     Liquidation of non-exempt property (only for Chapter 7)

A trustee is appointed to liquidate your non-exempt assets such as non-homestead real estate. The liquidation means that the property is sold and the money is distributed to creditors. The trustee is responsible for selling the property and conducting the sale. The trustee will use the proceeds to pay off any priority claims such as taxes or creditors with property liens. If anything is left over after payment of liens, taxes and other charges against the property, then the trustee will distribute the money to the creditors listed in the bankruptcy estate.  You have little or no input or control over this process.

STEP 7:     Confirmation hearing (only for Chapter 13)

After the repayment plan has been filed with the court, the creditors will receive a copy of the plan and have an opportunity to object to the plan. The court will set a date and hold a hearing to determine if the plan meets the requirements of the Bankruptcy Code and represents all of your net disposable income. If the plan is confirmed, then the trustee will begin making distributions to the creditors.

In Chapter 7, the case is usually closed within 90-120 days. Once it is concluded, the debtor receives a discharge.  It is likely that you will not have to return to the court after the initial 341 meeting. Unless the case is unusually complex, you usually will receive your discharge approximately 75-85 days after the date of the 341 meeting. In Chapter 13, the plan lasts for five years.