This post contains the basic steps to filing a consumer bankruptcy case to illustrate the complexities, potential problems and issues that face a consumer who chooses to “go it alone”. Filing bankruptcy is a very involved and difficult process. While this post contains a skeleton outline of how a basic case can progress, every case is unique, and this outline is in no way a substitute for hiring a competent attorney. Detailed information about filing for bankruptcy can be found on the courts website and the Administrative Office of the United States Courts.
Filing for bankruptcy without a lawyer is called a “pro-se” filing and is a very challenging process. Quite often people who file on their own end up not getting their debts properly discharged or having their case dismissed. The law behind Bankruptcy changes often. I strongly urge anyone trying to file for bankruptcy on his/her own to consult a competent bankruptcy attorney. This guide is for informational purposes only, and is in no way intended to be legal advice. It should also be noted that businesses cannot file for bankruptcy without a lawyer, and similarly, chapter 11 cases require a lawyer to file as well.
1. Make sure Bankruptcy is the best solution for you.
It is important that you are positive that you pass the means test before you file. The means test was created under the Bankruptcy Abuse Prevention and Consumer Protection Act (“BAPCPA”) on October 17, 2005. This test is based on all income a debtor receives during the 6 months before filing for bankruptcy.
2. Determine the type of Bankruptcy that you qualify for.
Chapter 7 Bankruptcy, aka Liquidation Bankruptcy, is where your non-exempt assets (often none) are used to pay your creditors. Usually it is important that you have very little, if any, disposable income at the end of each month to pay your debts off. If you have money left over at the end of the month, or have assets left over that are not exempt, you may consider filing for a Chapter 13 Bankruptcy. Chapter 13 is a payment plan for 3 to 5 years. If you are over the median income for your state, it will be a 5-year plan, otherwise, it will be a 3-year plan. Once you complete this Chapter 13 plan, you get the same discharge as a Chapter 7 would give. Please note that under a chapter 13 you must pay back at least what your Creditors would have gotten in a chapter 7 bankruptcy in order for the plan to be approved. Also, there are debt limits in a Chapter 13. In short, unsecured debts of up to $360,475 and secured debts need to be less than $1,081,400. These numbers change often, so check 28 USC 109(e) to determine the current limits. If you are looking to file a Chapter 13 Bankruptcy, you should contact a competent bankruptcy attorney in your jurisdiction since this is an extremely complicated filing.
3. Determine your assets.
This can be a somewhat tedious process, but it is one of the most important. Gather all of your records, including any retirement accounts, savings accounts, checking and other accounts. If you have a car or house, a good appraisal may be necessary to determine how to properly value these assets. Any piece of property you own, including real estate anywhere in the world, must be accounted in your filing. You also need to make a detailed list of all of your household belongings including items ranging from CDs, chairs, TVs, beds, all the way up to jewelry and other valuables. Once you have listed all of these items, you need to come up with an valuation for each item. Typically, things like clothing can be listed as “miscellaneous household clothing”, and things like pots, pans or silverware can be listed as “miscellaneous kitchenware”. However, if you have a valuable guitar it should be listed in detail and properly appraised. You also need to list insurance policies, lawsuits you have against anyone for anything, and any other possible legal claims you may have.
4. Determine what your exemptions are.
If you are a New York resident one good place to start is this page on my web site, http://midtownbankruptcy.com/do-i-get-to-keep-my-house-and-other-assets-in-bankruptcy/, where I list many of the popular exemptions. However, be careful, because these exemptions change often and must be taken with care. You will list these exemptions in Schedule C of your Bankruptcy petition.
5. Go to the Bankruptcy court’s website in your jurisdiction.
Most Bankruptcy Court websites have checklists and forms online that can help you file your petition.
6. Gather all information regarding your debts.
This is perhaps the most important step. First, you should pull a 3-bureau credit report. This will prove invaluable as it lists most of your consumer debts. Also, gather all of your medical, personal and other debts owed to anyone. You also need to verify that you have the correct “bankruptcy address” for each creditor. If you fail to list a debt, it may not be discharged. Similarly, you need to list all of your tax debts, student loans and other debts accurately even if they are non-dischargeable.
7. Take an approved Credit Counseling Course.
Approved agencies are listed on the court’s website. This course must be taken before you file for Bankruptcy. The course must be taken within 180 days before you file a 7 or 13 bankruptcy. There is also a Debtor Education Course that needs to be taken after your case is filed. The second course needs to be taken within 45 days of your Meeting of Creditors. After completion of these courses, a certificate will be issued to you, and this needs to be immediately filed with the court. After the second course is taken, a form 23 needs to be filled out and filed with the court.
8. Now complete all schedules, exhibits, mailing matrix, statement of financial affairs, your statement of intent and voluntary petition.
Once all of these are properly filled out, file them with the court and include a $299 fee for a Chapter 7 or a $274 fee for a 13 at the time of filing. If you cannot afford the filing fees, contact the court clerk and inquire about filling out a fee waiver request.
9. Prepare for your meeting of Creditors.
The court will send you a notice instructing you who your bankruptcy trustee is and when you meeting of creditors is scheduled to take place. You need to mail a copy of your petition to the US Trustee and Bankruptcy Trustee listed on this notice. Follow up with the Bankruptcy Trustee to make sure they have all of the necessary paperwork from you before your meeting. The meeting should only take 5 to 10 minutes if everything is in order. If everything goes well you should get a discharge paper in the mail.
Keep your discharge papers and send a copy to Experian, Equifax and Transunion. You should check your credit report approximately 6 months after receiving your discharge to make sure your debts are all taken off.
- Do not use your credit cards or incur any additional debt after you have decided to file for bankruptcy. The general rule is that you should not have used a credit card within 90 days of filing for bankruptcy. Similarly, you should not pay back any debts once you have determined you are going to file for bankruptcy. This is looked at as a preference since you are not allowed to pick and choose who gets paid back out of the “estate property”
- Do not leave anything that you own off of your petition as this is considered fraud and you can get in serious trouble for doing so!