Explaining the Bankruptcy Petition

One of the most important parts of the bankruptcy process is the completion and filing of the bankruptcy petition. It is, put simply, the official form required to file a bankruptcy in the United States. A bankruptcy petition can range from a dozen pages to hundreds of pages in length depending on the specific financial situation of the debtor. Each section of the petition is referred to as a “schedule.” Even if you hire an attorney to help you with your bankruptcy it is still vital that you understand, as the debtor, what your petition must include. Below is an explanation of 5 of the most important parts of the bankruptcy petition:

  1. Schedule D – In this section of the bankruptcy petition your secured creditors will be listed. A secured debt is one that is tied to a specific tangible item. This list can include your mortgage lender, the company who holds your car loan. Just because these creditors are listed does not mean that the items they are associated will be taken from you. In most cases you can keep your secured items safe by remaining current on the payments.
  2. Schedule E – This section of the petition involves listing your unsecured creditors. Unsecured debt is the most common type of debt in America and can include things like credit cards, medical bills, personal loans, payday loans, judgments, etc. In order to accurately list all of your unsecured creditors your bankruptcy lawyer may recommend pulling an up to date credit report.
  3. Schedule I – This schedule is a comprehensive list of the debtor’s household income. Even if your spouse is not filing a joint case with you, it is likely that the bankruptcy court will want to see his/her income as well.
  4. Schedule J – This schedule is a comprehensive list of the debtor’s monthly expenses. This list includes life’s necessities such as rent, car payment, utilities, clothing, groceries, and others. You will create this list with your attorney by estimating what you spend each month. Using this schedule in connection with Schedule I (income) the court will determine whether or not you qualify to file a Chapter 7 or Chapter 13 bankruptcy.
  5. Signature Page – On the final page of the petition the debtor(s) must sign their name agreeing that to their knowledge the petition is correct and does not involve fraudulent statements. Without a signature on this page your bankruptcy could be thrown out.

As you can see the petition involves lots of detailed information. It may seem overwhelming to you, but that is why hiring a bankruptcy attorney is recommended. Bankruptcy attorneys see petitions every single day and have an understanding of exactly what information needs to be on each schedule. Before signing the petition your attorney should go over the information with you and answer any questions you may have about the information you see.

From Billionaire to Bankrupt

In 2008 a man by the name of Halsey Minor was making the sale of a lifetime. He was selling his company “CNET Networks, Inc.” to CBS for $1.8 billion. After all was said and done Mr. Minor netted $200 million in the sale of his company. Even before this sale took place Halsey Minor was doing well financially. In 2001, Fortune ranked Minor as the 34th wealthiest American under the age of 40, with a net worth of $180.2 million. After the sale in 2008 Mr. Minor began investing in large real estate ventures that unfortunately for him, went sour.

Fast forward to 2013 and Halsey Minor has filed Chapter 7 bankruptcy because he is $100 million dollars in debt and does not have the money to pay it back. How could this possibly happen? That’s the question that thousands of Americans ask themselves every day when they sit down and calculate their income vs. the amount of debt they are in. Overwhelming debt does not happen overnight, but don’t let that get you down; there are solutions that can finally give you a light at the end of the tunnel.

Mr. Minor is the exception to the typical type of individual who needs to and eventually files Chapter 7 bankruptcy. In most cases it filing Chapter 7 is beneficial for individuals or families with low incomes and high amounts of unsecured debt such as credit cards and medical bills. Because Mr. Minor has luxury items like vehicles the court will most likely liquidate them in order to pay back some of the creditors that he owes. Granted, he does not have the entire $100 million that he apparently owes so there will be some creditors that are empty handed.

Most debtors who file Chapter 7 bankruptcy do not have an assortment of luxury items that the court can sell to give money back to the creditors and these cases are called “no asset bankruptcies.” In most cases the debtor that files a Chapter 7 bankruptcy can keep their vehicle and home safe from liquidation by staying current on the payment.

Chapter 7 bankruptcy is sometimes referred to as the “fresh start” bankruptcy because in most cases it can completely eliminate the common types of unsecured debt, thus giving the debtor a fresh financial start. Chapter 7 bankruptcy is the most common form filed in America today not only because of its simplicity, but also because the majority of Americans in debt do not have the excess monthly income to pay their debts back each month.

If this blog reminds you of anything, let it be that you are not alone in your struggle with debt. As you can see debt issues happen to everyone, even billionaires! The important key to remember is that even when you feel like you’ve let the debt go too far, there are still solutions. Call a local bankruptcy attorney today so ask about how a Chapter 7 bankruptcy could help you!

Tips for a Successful Bankruptcy

During my time as a bankruptcy paralegal I had the pleasure to see hundreds of successful cases come across my desk and I was quickly able to pinpoint trends in each of them. Once I knew which trends to look for it was easy to assume which of the other clients were on their way to a quick and painless case versus those clients who looked like they were going to see some trouble. Based on that experience I have put together what I think are the top 3 tips for clients who want to achieve a successful bankruptcy:

1. Communicate with your attorney

This tip is #1 for a reason; if you hire a bankruptcy attorney to help you file your personal bankruptcy case then communication with them is absolutely vital. This communication isn’t just a phone call to check in every week or two, but instead a steady dialogue between you and your attorney’s office in order to keep everyone involved with your case on the same page. If your attorney needs something from you don’t procrastinate; make it your first priority to get it to them as quickly as possible. Remind yourself that without financial information from you, your attorney cannot move forward with the filing of your case.

2. Gather necessary documents early

Filing bankruptcy requires specific financial information from you regarding all sorts of things and even the best bankruptcy attorney can’t produce that information. It solely comes from you, the debtor. Begin gathering those necessary financial documents early so that you can quickly produce them whenever your attorney requests them from you. Here are a few items that are regularly required by personal bankruptcy attorneys: paystubs, bank statements, tax returns, mortgage statements, vehicle registration, insurance information, and if applicable child support and/or alimony court orders.

3. Make sure your bankruptcy paperwork is correct

The paperwork filed with the bankruptcy court is called a “petition”. It can range from 15-100+ pages depending on your financial situation. When you are presented with your petition before your case is filed it may seem daunting, but if at all possible you should find the time to go through the paperwork to make sure that everything is correct. Some people choose to do this page by page with their attorney, but it can also be done alone since the information pertains to you. If you see mistakes on the petition then they can be fixed by your attorney’s office.

There can, and probably will be, hiccups with any bankruptcy case, but by utilizing these 3 tips you may be able to avoid some of the common slip ups. These tips will not only lead to a successful bankruptcy, but a more stress free bankruptcy. Think about it this way, if you and your attorney are effectively communicating with one another then you will be aware of exactly what is going on and have no reason for extra worries during the process.

Do it Yourself Bankruptcy: Good or Bad Idea?

Although filing bankruptcy is a legal process there is a way for individuals and/or married couples to file the paperwork themselves without the aid of an attorney. This is called filing “pro se” and in most cases it is not recommended. However, if you are going to file without an attorney then you should only do so in the case of Chapter 7 bankruptcy and not Chapter 13. This is mainly because Chapter 13 bankruptcy is much more complex and the paperwork involved requires more than just filling in the blank.

If you decide to file Chapter 7 bankruptcy on your own then you should start by gathering your paperwork that you will need to complete the petition (bankruptcy form). This paperwork will consist of your recent pay stubs, bank statements, vehicle registration, mortgage or lease documents and the last few years of tax returns. With this information handy you will be able to fill out the necessary petition paperwork. The Chapter 7 bankruptcy forms you need can be acquired online or from your local federal courthouse.

Once you have correctly completed the forms you will need to complete the 2 courses necessary to file bankruptcy. Registration for those courses can be found online at www.bkcert.com. These courses can be taken online or over the phone and are not graded for correct answers, but rather for completion. The first course known as the Credit Counseling Course must be taken before your paperwork is filed with the courts. The second course called the Debtor Education course must be completed after your case is filed with the courts.

In order to file your Chapter 7 bankruptcy forms with the court you will be required to pay a filing fee of $306. This is typically a non negotiable fee, but if you feel that it will be a hardship for you to pay it then you can request a waiver from the court. Once your paperwork has been filed you will be notified by mail about the time and date of your bankruptcy hearing. The hearing is a requirement for anyone filing bankruptcy and must be attended. During the hearing you will be asked questions by your bankruptcy trustee about your financial situation and statements on your paperwork. The bankruptcy hearing normally lasts anywhere from 10-15 minutes.

Once you have completed your hearing you will wait 60-90 days before receiving your discharge paperwork in the mail stating that your bankruptcy case has been completed and it was successful. You are the only person that can decide whether or not a do it yourself bankruptcy is for you, but if you have any hesitation at all it may be best to consult with an attorney. Don’t let the attorney’s fees intimidate you, in most cases bankruptcy attorneys are willing to work with you on a monthly payment plan. Hiring an attorney could mean the difference between your bankruptcy being successful and clearing away your debts, or being incorrect and dismissed from court.

Understanding a Bankruptcy Discharge

If you are looking into filing bankruptcy for the first time you may realize quickly that there is some vocabulary tossed around that doesn’t really make sense. One of many legal words is “discharge” and it is a crucial part of filing personal bankruptcy. So what is it and what does it mean for you? Here is some key information to know about a bankruptcy discharge:

1. What is it?

Technically a bankruptcy discharge is a legal order stating that the debtor who has just filed bankruptcy is no longer responsible for paying back certain unsecured debt. The discharge also prohibits any debt collection attempt against the debtor including letters, phone calls or legal action. Put simply, a bankruptcy discharge is the a piece of paper signifying that your bankruptcy has been completed and it was successful.

2. When is it received?

The timeline on when a bankruptcy discharge is received depends on which type of personal bankruptcy is filed. If a Chapter 7 bankruptcy is filed then the discharge is typically received 2-3 months after the debtor’s bankruptcy hearing. If a Chapter 13 bankruptcy is filed then the discharge will not be received until the 3-5 year repayment plan is complete. Under the current bankruptcy code the discharge paperwork is mailed to the debtor via the US Postal Service.

3. Can all debts be discharged?

Receiving your bankruptcy discharge in the mail does not instantly wipe away any and all debts you have. There are certain types of debt that cannot be discharged such as student loans, child support, alimony, and debts owed to the government like back taxes and parking tickets. Before going bankrupt you should have a chance to review what debts you will still be left with after you receive your discharge. If the debt you are struggling with is mainly nondischargeable debt, then filing a Chapter 13 bankruptcy may be your best option.

3. Can it be denied?

The bankruptcy court has the right to revoke any debtors discharge if they find that fraud has taken place within the case. Committing fraud when filing bankruptcy can happen in many different ways. Some common fraud findings are: deliberately omitting information from the bankruptcy paperwork, falsely obtaining a discharge, and not admitting to any additional income expected in the next few years. In most cases hiring a bankruptcy lawyer will help you avoid simple mistakes that the court views as fraud.

A bankruptcy discharge is the light at the end of the bankruptcy tunnel for most debtors. The process of filing for bankruptcy may be difficult and complex at times and in some cases it can take longer than you wanted it to, but in the end the financial fresh start that it provides is absolutely worth the wait. If you are dealing with large amounts of unsecured debt, like credit cards or medical bills, that you cannot see yourself paying off alone then filing bankruptcy may be an option you need to consider.

How to Avoid the Bankruptcy Blues

Is the thought of having to file bankruptcy getting you down? Don’t let it! There are benefits to filing bankruptcy that could really help you and/or your family get out of debt quickly, and achieve a financial fresh start. Filing bankruptcy happens for dozens of reasons from filing a Chapter 7 bankruptcy to get rid of recent payday loans to filing a Chapter 13 bankruptcy to halt a foreclosure. Not all the negative news you hear about bankruptcy is true, and I’m here to give you the inside scoop on how to avoid the bankruptcy blues.

1. Don’t believe everything you hear

Sure, bankruptcy gets a bad reputation from time to time, but put simply it is a process that helps thousands of Americans get out of debt and get their finances back on track. You may hear that bankruptcy is a “credit score killer,” but in reality it can help you rebuild your credit score to higher than it has ever been before. Once you file bankruptcy and wipe away unsecured debts like credit cards and medical bills you can rebuild your credit by making timely payments on secured items like your home or vehicle.

2. Do your own research

A sure fire way to avoid getting worried about filing bankruptcy is to go into the process with knowledge. There are hundreds of resources on the internet nowadays that do a great job of explaining bankruptcy in ways that anyone, not just attorneys, can understand. Be sure to look into bankruptcy rules called “exemptions” that are specific to your state and outline the value of certain items that can be protected from liquidation. If you aren’t comfortable researching on the internet try asking friends or family who have filed before or contacting local bankruptcy attorneys for free initial consultations.

3. Remember that your situation is unique

No two bankruptcies are the same, so if you hear negative things about someone else’s bankruptcy remember that your situation is unique and can turn out drastically different. To give yourself some confidence about the process sit down with several bankruptcy attorneys to discuss your specific situation and which Chapter of bankruptcy will help you the most. You will ultimately decide whether or not filing bankruptcy is best for you and/or your family – that’s really all that matters.

Deciding to file bankruptcy is a difficult decision and may not feel like your proudest moment, but if you are facing an overwhelming amount of debt that you cannot see yourself paying off in 1-2 years then it may be a decision you need to consider making. Remember that you aren’t alone and thousands of people file bankruptcy each year to gain a fresh start financially. Don’t let the bankruptcy blues get you down; go ahead and find the best bankruptcy attorney for you, get your paperwork filed with the court, and before you know it your case will be over and you will be debt free!

Chapter 7 Bankruptcy Fast Facts

Interested in learning more about how Chapter 7 bankruptcy can help you get out of debt? Let us help with that by giving you some Chapter 7 bankruptcy fast facts that should point you in the right direction:

1. Chapter 7 bankruptcy is the most common type of personal bankruptcy filed today.

Thousands of individuals and married couples use Chapter 7 bankruptcy protection every month. It is one of two types of personal bankruptcy and is more common because it caters to individuals with low incomes, high debt levels, and little to no assets.

2. Chapter 7 bankruptcy is the quickest form of personal bankruptcy.

Filing Chapter 7 bankruptcy can be done in as quick as 30 days if the debtor is in dire need, but typically the entire Chapter 7 process takes between 4-6 months. After you hire a bankruptcy lawyer they will gather financial information from you, create the official court documents, and file the bankruptcy paperwork (petition) with the court. Soon after your paperwork is filed you will attend a short hearing and 30-45 days following your hearing you will receive paperwork stating that your bankruptcy has been completed.

3. Chapter 7 bankruptcy is typically the cheapest form of personal bankruptcy.

The cost of filing a Chapter 7 bankruptcy will depend on several different variables such as the state you live in and the amount of debt you are filing on. In most cases the bankruptcy attorney you choose will estimate how much work will need to be done on your case before quoting you a fee that will need to be paid before your case is filed. In most cases a Chapter 7 bankruptcy filing will range between $1000-$2000 dollars.

4. Chapter 7 bankruptcy can erase most types of unsecured debt.

One of the reasons that Chapter 7 bankruptcy is so common in America is due to the types of debt that it erases. Credit card debt, medical bills, payday loans and personal loans are all types of debt that can typically be wiped away by filing a Chapter 7 bankruptcy. These types of debt all fall into the category of “unsecured” debt which is debt that is not tied to a particular loan or object like a home or vehicle.

5. Chapter 7 bankruptcy can be filed every 8 years.

In 2005, new bankruptcy laws named the Bankruptcy Abuse Prevention and Consumer Protection Act stated that an individual must wait 8 years between filing separate Chapter 7 bankruptcy cases. This was one year longer than the waiting period was before 2005. The 2005 laws were put in place in order to avoid abuse of the bankruptcy system.

These 5 facts are just the tip of the iceberg when it comes to filing Chapter 7 bankruptcy, but they are still valuable pieces of information for anyone looking into how it would help their financial situation. Filing Chapter 7 bankruptcy is a right that Americans are given to help them overcome debt that is too overwhelming for them to come out of alone.

When Creditors Sue You

I truly enjoyed my time as a bankruptcy paralegal; and one of the reasons is that I was able to tell clients that by the time their bankruptcy was over they would be starting a new life not only financially, but emotionally as well. When debt starts to pile up it typically leads to other issues like creditor phone calls, letters, and sometimes civil lawsuits. These civil lawsuits originate when a creditor (like a credit card company) decides to summon you to court in order to ask the judge for a judgement against you that would ultimately require you to pay the debt. So how does filing bankruptcy work when creditors sue you? Here’s an outline of what a typical timeline would look like if your creditor sues you in the midst of your bankruptcy:

1. You receive a summons

In most cases lawsuits start with a summons delivered to the defendant stating that the date and time they are to appear in court. A summons will also list who is suing your and for what reason.

2. You contact your attorney

If you have already hired a bankruptcy lawyer then you should contact them immediately and let them that you have received the summons. Be sure to tell them who the summons is from because their response will differ depending on if it is a secured or unsecured creditor.

3. You appear in court

Unless your bankruptcy case is filed before the court date listed on the summons you should make plans to appear. Because this is a civil lawsuit and separate from your personal bankruptcy, your attorney may or may not appear with you, but that is nothing to worry about. If you miss this court appearance it is typical for the judge to award a judgement to the creditor who is suing you.

4. Your request more time

In most cases you can ask the judge for a continuance when you appear at the hearing. It is typical but not guaranteed for you to be granted a single continuance. A continuance will give you and your bankruptcy attorney more time to get your case filed and avoid the next hearing altogether.

5. You finalize your bankruptcy

Whether or not a judgement is put against you after the hearing you and your attorney will want to file your Chapter 7 or Chapter 13 bankruptcy as soon as possible to avoid possible garnishments or other civil lawsuits. Keeping your financial paperwork organized and keeping in contact with your bankruptcy lawyer is key to a speedy filing.

It is extremely common for debtors to be sued by their creditors during the preliminary bankruptcy process. Creditors have a right to take you to court for debt and they take that right seriously. Just remember that by choosing to file bankruptcy you are already one step ahead of your creditors and the law is on your side. And again, by the time your bankruptcy is over you will be debt free and the creditor stress will be over.

Bankruptcy vs. Debt Settlement

It seems like there are always new debt “solution” trends every day. Just in the last several years we have seen the emergence of products like credit counseling and debt settlement that promise to reduce your debt within a certain amount of time without having to ever file bankruptcy. These services are typically provided by financial companies that require you to put an amount of money into a new account every month and when the time is right they will negotiate with your creditors to hopefully pay them off. So is debt settlement a better solution to filing bankruptcy? Here’s my take on why I think the answer is NO.

1. No legal requirements for creditors to comply

A debt settlement is ultimately when a debtor pays a company to negotiate with their creditors on their behalf with the hope of reducing their overall balance. The key is the negotiators can only “hope” that the creditors agree to reduce the debt, there is no requirement for them to do so. On the other hand, if a debtor files a Chapter 7 bankruptcy or a Chapter 13 bankruptcy and it is approved by the court the creditors are required to comply with the courts orders, whether it be to completely erase the debt, or accept a decreased payment.

2. Debt settlement typically takes longer

As I mentioned earlier typical debt settlement programs will set up a bank account for its customers and tell them a certain amount of money to put into it every month. Once the account reaches a specific amount the debt settlement company will then begin negotiations with creditors. What many customers do not realize at the beginning of this process is how long it will take to reach the specific amount that is required for negotiations to start. In some cases it can take anywhere from 6 months to 2 years for the account to be large enough to meet the requirements. A quick chapter 7 bankruptcy can be done in 5-9 months.

3. No protection from creditor harassment

In the weeks and months that a debtor spends depositing money into their debt settlement account they will most likely still be receiving creditor phone calls, letters, and general demands for payment. In most cases there is no protection that debt settlement companies can give for this. That means that creditors can take a debtor to court even though they are involved in a debt settlement program. That is not the case with bankruptcy. The day your bankruptcy is filed with the court is the last time a creditor can legally contact you.

Ultimately the only person that knows what’s right for your situation is you. Consult with friends, family, bankruptcy attorneys, and even debt settlement companies before making a final decision. Just remember that there are options everywhere and you are not alone in this struggle: people just like you are having to decide what to do about their debt problem.

Bankruptcy Defined

According to the official United States courts online glossary, (that you can view here) bankruptcy is defined as: “a legal procedure for dealing with debt problems of individuals and businesses; specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code).” What does that mean in layman’s terms? Let’s go through it here together:

A Legal Procedure

This means that the process of filing bankruptcy is required to be done in a United States court of law and overseen by an appointed US bankruptcy trustee. Anyone who tells you that a bankruptcy can be filed outside of a US courtroom is incorrect. This does not, however, mean that all bankruptcies require the aid of a licensed attorney; it is possible to file a bankruptcy “pro se” or on your own. Nevertheless, the hiring of a bankruptcy lawyer is highly recommended due to the amount of law involved, the many forms required, and the complex calculations involved with larger cases.

For Dealing with Debt Problems

This is without a doubt the main object of any bankruptcy, no matter which chapter it is. All bankruptcies have the same common goal: to eliminate or reduce problem debt. Note that the definition doesn’t define what types of debt are allowed to be eliminated by a bankruptcy – the actual law does this.

Of Individuals and Businesses

This part of the definition outlines who is allowed to be involved in the filing of a bankruptcy. There are different Chapters associated with personal and business bankruptcies. The most common types of personal bankruptcy are Chapter 7 and Chapter 13 while the most common business bankruptcy is Chapter 11. The type of personal bankruptcy filed by most Americans each year is Chapter 7.

Specifically, a case filed under one of the chapters of title 11 of the United States Code (the Bankruptcy Code) – This part of the definition lists the exact law that governs bankruptcy: title 11 of the US Code. This part of the US code is commonly referred to as the “bankruptcy code” and has been revised several times since its initial creation. The most recent revision to the bankruptcy code was in 2005 with the implementation of the Bankruptcy Abuse Prevention and Consumer Protection Act which was put in place to make the abuse of bankruptcy less likely.

This may seem like an extremely simple way to describe an incredibly complex system of rules and laws, but starting with a simple definition will help put the ultimate goal of the bankruptcy process in perspective for you. Yes, there is a lot to learn and that can be done, but it’s important to know that the option of bankruptcy exists when you are faced with an overwhelming amount of debt and do not know where to turn. Talk to a bankruptcy attorney in your area if you think this legal process could be of benefit to you.

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