What is the Bankruptcy Process?
Since the federal bankruptcy laws changed, the process through which individuals file for bankruptcy has changed as well. It is much more complicated and risky to prepare and file a bankruptcy on your own. You need the help of a knowledgeable bankruptcy attorney at Illini Legal Services and attorney C. David Ward in order to effectively determine if filing bankruptcy is the right course of action to take in resolving your financial situation.
Next, before you file, you and your lawyer must determine which type of bankruptcy best suits your needs: Chapter 7 or Chapter 13.
Attorney C. David Ward of Illini Legal Services will help you with the new means test calculation and new pre-petition credit counseling requirements.
From this point, our attorneys at Illini Legal Services can start to prepare your bankruptcy petition. This includes the preparation of the petition, the schedules, the statement of financial affairs and electronic filing the case with the Bankruptcy Court.
Once the petition is filed, the automatic stay will go into effect and your creditors must stop harassing you. You will have to attend a 341 meeting with creditors with the United States Trustee. The lawyers at Illini Legal Services will have explained the full process to you so there will be no surprises when you attend the meeting. Once the meeting is over, before the debt is discharged, you will have to complete post-petition financial counseling. Throughout the bankruptcy process, Illini Legal Services will help you get a fresh start and regain your financial freedom.
7 Step Bankruptcy Process
Due to the confusion and fear of the bankruptcy we have set forth our Seven Step Process to explain the bankruptcy journey and where it leads.
Your financial matters have gotten so distressing that you know you must do something. You are confused and baffled by the enormity and detail of the information available. You must at this point start to help yourself and consult with a bankruptcy professional. Calling our office is the beginning of organizing your affairs so that you can have peace of mind and regain control of your life. (The steps below outline a normal Chapter 7 bankruptcy case)
I. STEP ONE: At the initial meeting with one of our attorneys you will be fully informed of the bankruptcy process, what you must do and what you can expect from your attorney. There is no charge for the initial meeting. The meeting will last approximately 45 minutes. At this meeting:
A. DOCUMENTATION. You will receive several documents explaining the process and giving you valuable information that is required by the bankruptcy laws. These include:
1. Important information about bankruptcy assistance services from an attorney or bankruptcy petition preparer.
2. Statement of Information required by 11 U.S.C. Section 341. This is put out by the United States Trustee's Office.
3. Information notice required by 527(a)(2)(A-D)
4. Retainer agreement and complete cost, expense and fee information about the process and the length of time it may take.
B. THE PROCESS. You will discuss the bankruptcy process, the various types of bankruptcy that can be filed and what decisions you must make, what the results of those decisions might be, the information you must provide, and what happens next.
II. STEP TWO: Once the decision to take the next step has been made, we must get to work and decide what type of bankruptcy is best for you. Most likely you will be considering a Chapter 7 or Chapter 13; we must also be paid a retainer fee which includes some legal fees and the cost of the credit report.
To determine the bankruptcy that is appropriate it is necessary to do a MEANS TEST that is required by the bankruptcy laws. This is a new requirement of the bankruptcy code and requires you provide us with complete information about your income and complete data about your expenses. You may have to do some digging. Once we get this information we will be able to so the calculations necessary for the means test and we may be able to decide which chapter is right for you. Once we have received the information from you and done the MEANS test calculations we will get together and go over the situation.
III. STEP THREE: Now we should know with some certainty:
A. WHERE WE ARE.
1. Whether or not you are going to avail yourself of the protection of the bankruptcy law.
2. What chapter in bankruptcy you will decide on, a Chapter 7 or a Chapter 13.
3. What additional information we will need to take the next step.
B. INFORMATION GATHERING. "Step Three" starts off with more information gathering. We will have to have a current credit check done and may have to get outside opinions concerning the value of your house, car or other items that will be involved in filling out the schedules of the Petition for Bankruptcy. Next we must fill out the Bankruptcy Petition. This includes the Schedule of Assets; and Income and Expense affidavit; the statement of financial affairs; declaration of your intentions of what assets you would like to keep; the exemptions you are claiming; and what your agreement is concerning attorney's fees.
C. PREPETITION COUNSELING. You will also have to complete the requirement of pre petition credit counseling. This can easily done over the phone or via the internet. The law requires that you have further information about the process you are involved in from an independent party; that you are advised of the availability of financial counseling; and that you discuss with a counselor your financial situation. We will provide for you names of various credit counselors which have been approved by the United States Trustee's office. The course should last about one hour and can be taken in one or two sessions. The credit counseling agency charges for the certificate of completion. You must however take the counseling as it is the admission ticket for you to be able to file the bankruptcy.
D. STAGES. "Step Three" can happen in stages. It is the most expensive step. Additional fees and costs will be due. There is the filing fee to the clerk's office of the bankruptcy court. The fee is $306.00 for a Chapter 7 and $281.00 for a Chapter 13 and there may be payment due for outside services that we have had to retain. There may be two or three meetings at our offices. Each of these meetings may last over an hour.
ONCE THIS IS DONE, THE CASE WILL BE FILED AND UNCERTAINTY WILL BE AT AN END!!
IV. STEP FOUR: Once the case is filed what happens? While your next involvement will be attending what is known as the "341" meeting, which will be someplace between 20 and 40 days after the case is filed, two very important things have occurred.
A. THE AUTOMATIC STAY. First, the automatic stay is now in effect. This should stop all creditors from harassing you and stop all collection proceedings that creditors may have started against you. While the stay can be lifted, in most cases it stops any further creditor activity outside of the bankruptcy system.
B. THE TRUSTEE. Second, a Trustee, appointed by the United States Trustee's Office, becomes the owner of all of your assets and your bankruptcy estate is created. The Trustee's job is extremely important and powerful. The Trustee's job is to find out what assets you have; to collect them; sell them; and distribute the money received to your creditors. How does the Trustee know what you have? If you will recall Step Three, we filled out the asset schedules; noted the exemptions you will be using and stated what your income and expenses are. One of the tough things about Step Three was collecting and making sure the schedules were correct.
V. STEP FIVE: Once the case is filed you will attend a "341" meeting. What is the "341 meeting"? The number "341" simply means that paragraph number 341 of the bankruptcy code provides, in part, that the Trustee will have a meeting, which you MUST attend, where the Trustee and any creditors who want to attend may ask you questions about your assets. Since we will have done a thorough job in preparing the bankruptcy petition and its schedules and will have met with you and prepared you for the "341" the meeting should not have any surprises. We will have to get together for approximately a half an hour sometime before the meeting and go over what will happen. We will then attend the meeting with you. Typically the Trustee's meeting is short. The Trustee is not a Judge and while the meeting can be informal in nature it is very important and is not to be taken lightly. Once the meeting is over, depending on the particulars of your case the process is essentially over. You will receive in the mail a "discharge" from the bankruptcy court. At this point the Trustee no longer has control over the assets you have retained.
VI. STEP SIX: Under the bankruptcy act, there is now the additional requirement for post petition financial counseling. We insist that the second counseling course in financial management be taken and the certificate be filed with the court prior to attending the 341 meeting. If the certificate is not filed the trustee will refuse to issue the discharge by the time your case has reached that far, we will have all the necessary information and be able to help you conclude the process.
VII. STEP SEVEN: The official process is now over. What has happened and what do you do now? Essentially your financial life has been restructured and you have a financial plan to help you regain your financial freedom. You should be able to pay your bills and start rehabilitating your credit. We have several helpful tips and handouts to help you with the process. While bankruptcy and the bankruptcy process are sometimes hard and debilitating, it can and should be the new "fresh start" for you and your finances. Our office is with you the entire way, advising you, answering your questions and handling your relationship with the bankruptcy court and the bankruptcy process.
(We would note that the "Seven Steps" outlined above are generalized and do not fit every case. Each Bankruptcy case has its own facts and circumstances. Hence since no two cases are alike, the Seven Step Process will necessarily differ for each case. If you have decided to file a Chapter 13, there are two additional steps; the legal fees are higher; and the process takes more time. The Chapter 13, in most cases, presumes that you will retain your assets and make payments to the Chapter 13 Trustee.)
At Illini Legal Services, we offer a free in person consultation to each of our clients. During your consultation, we will take the time to listen to your financial concerns and assess your case and individual situation. We have four locations to serve you. Contact us today for help!
Illini Legal Services is engaged in the private practice of law and is not a public legal aid agency. We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.