The Stages of Bankruptcy

In 1978, the U.S. Congress enacted the Bankruptcy Code, which governs all bankruptcy cases. Federal bankruptcy laws were enacted “to give debtors a financial ‘fresh start’ from burdensome debts.” While the Bankruptcy Code has been amended several times, the bankruptcy process is still complex—something that even the U.S. Courts recognize. To make matters worse, the Bankruptcy Code contains complex legal concepts and terms, such as “automatic stay,” “discharge,” “exemptions,” and “assume.” The complexity of the Bankruptcy Code often makes it difficult for individuals to understand and appreciate the various stages of bankruptcy. To help with this problem, this article provides a brief overview of the bankruptcy process and its various stages.

Bankruptcy Rules and Structure

The bankruptcy process is governed by the Federal Rules of Bankruptcy Procedure and local rules of each bankruptcy court. The Bankruptcy Code and Bankruptcy Rules, in connection with the local rules, establish the legal procedures to help individuals and businesses handle debt problems. Each judicial district in the country has a bankruptcy court. Throughout the country, there are 90 bankruptcy districts.

Bankruptcy Stages

There are six basic types of bankruptcy cases, which are typically described according to their chapter. These include, Chapter 7, 9, 11, 12, 13, and 15. Some forms of bankruptcy provide for reorganization of one’s assets, while others provide for liquidation. Regardless of the type of bankruptcy, the bankruptcy process in general can be divided into distinct categories.

The first step in the bankruptcy process is to gather one’s pertinent financial information and other relevant documents. This includes copies of bank statements, pay stubs, state and federal tax returns, investment information and credit and loan information. Importantly, the type of documents needed may vary depending on the bankruptcy chapter.

After all of the relevant documents and information is gathered, the next step is to prepare one’s bankruptcy petition. It is critical at this stage to engage an attorney who can advise the filer on what type of bankruptcy filing is appropriate and who can assist in completing and submitting the petition. The attorney should ensure that all of the filer’s financial and personal information is accurately listed on the petition.

Third, before the petition is prepared, the individual will need to seek credit counseling from an approved nonprofit credit counseling agency. This must be done 180 days prior to filing and usually lasts about an hour. Fourth, after the petition is prepared, it is important to review the petition to ensure that all of the information has been accurately recorded. The petition must be filed in the court that has jurisdiction over the person filing the petition, which is usually where the person lives.

Fifth, after the petition is filed, the bankruptcy applicant will attend a “meeting of the creditors.”  The meeting occurs about a month after the petition is filed. A bankruptcy trustee will verify that the petition is accurate. The bankruptcy filer’s attorney will help with this meeting. During this meeting, creditors will have the opportunity to object to the bankruptcy filing. This objection can also be done in writing.

Finally, after the meeting of creditors, the individual filing for bankruptcy will receive a discharge of debts, if the filing is under Chapter 7. This usually happens about a month after the meeting of creditors. If the individual filed for bankruptcy under Chapter 13 then the individual will receive a discharge after the repayment plan is completed.

Questions About Bankruptcy? Contact an Experienced Bankruptcy Attorney

If you have any questions about filing for bankruptcy or the bankruptcy process, it is important to reach out to a bankruptcy attorney. Joshua Just is an experienced bankruptcy attorney who can help you navigate the complex bankruptcy process and its various stages.

Leave a Reply