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Bankruptcy: The Process

Bankruptcy • Intro • Pros & Cons • "Flavors" • The Process • Once is Plenty • Resources

The steps to be followed in a bankruptcy proceeding are the same whether you do it yourself or hire someone to help you. Chapter 7 is simpler, since you do not present a plan for recovery.

Chapter 7

The initial filing is the first step. You or your agent will file several forms with the bankruptcy court listing income and expenses, assets, debts and property transactions for the past two years. Be honest. Be sure to list everything you owe.

The fee for this filing is $200. It may be waived for people who receive public assistance or live below the poverty level. A court-appointed trustee is assigned to oversee your case.

About a month after filing, you must attend a "meeting of creditors" where the trustee reviews your forms and asks any questions. Despite the name, creditors rarely attend. At this meeting, you must declare any nonexempt property and give it (or its value in cash) to the trustee. Normally, this meeting lasts about five minutes.

Three to six months later, you receive a notice from the court that "all debts that qualified for discharge were discharged." Your case is then over. Then your case is over.

Chapter 13

You file the same forms as above plus a proposed repayment plan, in which you describe how you intend to repay your debts over the next three, or in some cases five, years. The filing fee is $185 and, unlike the Chapter 7 fee, cannot be waived. A trustee is assigned to oversee the case.

As in Chapter 7, you attend the meeting of creditors. Often one or two creditors attend this meeting, especially if they don't like something in your plan.

After the meeting of the creditors, you attend a hearing before a bankruptcy judge who either confirms or denies your plan. If your plan is confirmed, and you make all the payments called for under your plan, you often receive a discharge of any balance owed at the end of your case.

Credit Cards

Sometimes consumers have managed to keep one credit card in fairly decent shape while everything else falls apart. If you have a credit card with a small balance and you want to keep it through your bankruptcy, pay it off in full before you file for bankruptcy. That way, it's not a liability and you don't have to list it.

Next: Once Is Enough

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