17 Mar I DECLARE BANKRUPTCY! What Is Really Involved?
I DECLARE . . . BANKRUPTCY! So said Michael Scott in the sitcom television show “The Office.” [For video, click here I declare bankruptcy! ] With that, he was absolved of his debts.
As we know and as Michael’s co-workers know but apparently Michael did not know, there is more to it than that. So what is really involved in “declaring bankruptcy.”
First, you must file a petition with the United States Bankruptcy Court located for the district in the state in which you live. The petition is a fairly straight-forward document with basic information about you.
Attached to that petition, you must file a Statement of Financial Affairs. This document sets out financial information such as income that you have earned year-to-date; last year and the year before. It will also require you to list any business income that you may have received or other type of income such as Social Security payments, child support payments and other sources of income. You will also be required to list payments made to your creditors within certain time frames. You will need to list any charitable contributions; whether you closed any financial accounts and the amount contained in those accounts. You must also list any property that you transferred within certain timeframes. You can find out more here.
Additionally, you must file a series of schedules. These schedules list a variety of information including your assets, a list of creditors, and income/expenses. A detailed listing of your assets is critical because you are under an obligation to list your assets and if you want to protect your assets to the maximum extent available, you must list them. You are required to state your income on a schedule and your expenses. A listing of your creditors is also required divided up into secured creditors (creditors with collateral securing the obligation), unsecured creditors, and priority creditors–usually tax claims, child support obligations and other claims. For more, see here.
You must also file a Statement of Current Monthly Income (Form B22A or B22C). You will need your paychecks or other evidence of income for the six months prior to the month you file to calculate your current monthly income. If your income exceeds the median income for your state, you may have to complete the “means test.” After you do the “means test” calculations, if applicable, you determine if you are eligible to file a chapter 7 and/or to see what amount of money must be paid to your unsecured creditors under a chapter 13 plan. For more on the Means Test, click here.
Just from the above, there is a lot of information to compile for the court. And we have not even gone to court, yet?
After these documents are filed, a creditors’ meeting is scheduled approximately four weeks after you file your petition. At that meeting, you will meet with the trustee who will examine your case toensure all is in order. Your trustee is also looking for assets that can be liquidated or soldto pay your creditors if a chapter7 case or to see that your plan complies with theBankruptcy Code.If all isin order, then, if you are in a chapter 7 case, your case will ultimately go to a discharge and your debts eliminated. If you are in a chapter 13, you continue to pay your money to the trustee and once all the payments are made, your debts will be discharged and your mortgage current if included in the plan.
As you can see, there is far, far more required of a bankruptcy filing. If you are facing debt issues, it is worthwhile to consult with experienced bankruptcy counsel such as on this website.
Adrian Lapas, Esq.
Latest posts by Adrian Lapas, Esq. (see all)
- Valuing Assets in Bankruptcy–A Cautionary Tale (In re: Worley, 4th Circuit) - February 28, 2017
- Eastern District of North Carolina Issues Order in Wake of Hurricane Matthew - October 14, 2016
- Timing in Bankruptcy Cases - April 21, 2016
- Debt Settlement–Yet Again? - February 26, 2016
- New Forms for Bankruptcy Cases - December 31, 2015