Robert C. Neeley, Jr.  

Bankruptcy Details

 

Mandatory Pre-Filing Credit Counseling

Before you file for bankruptcy, you must participate in a credit counseling session and get a certificate proving that you have done so. This typically costs around $50 to $75 and takes about 90 minutes, and can be done online or over the phone. If you are planning to file jointly with your spouse, you can both attend the same counseling session, buteach of you must get a separate certificate.

 

The new bankruptcy law states that these agencies must provide credit counseling services without regard to a client’s ability to pay and must disclose the possibility of a fee waiver or fee reduction before beginning the counseling session.

 

Many critics of the new bankruptcy law see the credit counseling requirement as just another bureaucratic obstacle for already-desperate debtors. Perhaps so. But try to make the most of this 90-minute session by getting as much free information as you can. Use it as a way to get a second opinion about your financial situation, to gauge whether bankruptcy is, indeed, the right choice for your situation. However, by law, a credit counselor cannot actually advise you whether you should file for bankruptcy.

 

Preparing and Assembling Your Bankruptcy Papers

Filing for bankruptcy requires you to fill in 50+ pages of forms detailing all of your current debts, assets, income, and expenses, as well as your intentions regarding loans that are secured by collateral (such as car loans).

 

In addition to providing this information, you're required to make decisions about what you plan to do about your secured debts (that is, debts that are secured by property you own). The cost of this phase depends on whether you hire professional help.

 

Do-it-yourself 

With some diligence, you can prepare all these forms yourself... but if you're not the careful, diligent type, self-help might not be for you. Bankruptcy rules can be unforgiving, and became more so since the passage of the 2005 law. There was a time when incomplete filings could be easily amended once the errors were called to the filers attention.

 

Under the new law, it's extra important to have all your ducks in a row before you file -- and there are quite a few ducks... in the form of many pages of forms to fill in and supporting documentation that you must gather and organize before you're ready to file.

 

Professional Help 

If you prefer not to handle it yourself, you can find listings of local bankruptcy lawyerson this website, in the yellow pages and on online lawyer directories, such as the National Association of Consumer Bankruptcy Attorneys (NACBA).

 

Meeting with Trustee and Creditors

Within 20 to 40 days after you file your papers, you'll have a "meeting" with the bankruptcy court trustee. It's not a meeting in the traditional sense. You show up at a certain time, with a bunch of other people who have their meeting that day, and sit and wait for your name to be called.

 

At this meeting the trustee can ask you questions about the information you put on on your forms. Creditors can ask questions and object to or challenge the applicability of exemptions you are claiming.

 

Filing Motions & Responding to Creditor Objections

Depending on your circumstances these are two things you may or may not need to do.

 

Filing Motions (Requests) With the Court

There may be some liens (creditors' claims against your property) that you can have removed by filing some extra paperwork after your original bankruptcy forms have been filed.

 

Responding to Objections

Creditors or the trustee have 30 days after the 'close' of the creditors' meeting object to something on your forms. You may (but are not required to) respond before the court has a hearing on the matter. Depending on the objection you may need to hire some lawyer to properly respond to it.

 

Mandatory "Debtor Education" Debt Management Course

As if you don't have enough hoops to jump through already, when you've completed all the other parts of your bankruptcy, you still don't get that magic piece of paper called the "discharge" until you complete a course in debt management.

 

Total Cost to File Bankruptcy

The actual total cost of your bankruptcy will depend on:

 

1. Whether you qualify for a fee waiver.

2. Whether you are lucky enough to qualify for free legal aid services that happen to be available where you live.

3. Whether you handle the form preparation and filing yourself or pay someone to help you or do it for you.

4. How complicated your financial situation is -- for example, whether you're facing imminent foreclosure, whether your debts involve child support or back taxes, and whether you have valuable assets that are not fully protected by an exemption, such as a home.

 

The costs listed here do not include the value of any property you may need to give up in a Chapter 7 bankruptcy, or the amount you would have to pay over three to five years into a Chapter 13 plan. This is only the cost of going through the filing process.