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THE BANKRUPTCY PROCESS

A STEP BY STEP GUIDE Understand the Bankruptcy Process in Ohio Before Getting Started with Your Bankruptcy Petition

SCOTT R. NEEDLEMAN COLUMBUS BANKRUPTCY AND FORECLOSURE DEFENSE ATTORNEY


The decision to file bankruptcy is never made lightly. Most debtors struggle with the decision for months trying to avoid bankruptcy, frequently getting themselves even deeper into debt trying to juggle financial obligations. Due in large part to the recent recession, the number of bankruptcy filings have hit record highs in the United States. If you are one of the millions of people across the country who has made the difficult decision to file for bankruptcy, you are likely apprehensive about the process itself and unsure what to expect. Although every bankruptcy petition is unique, there are some basic steps that most debtors go through during the bankruptcy process. Understanding the process better before you get started may ease some of your apprehension.

MAKING THE DECISION You may have already considered all of the pros and cons to filing bankruptcy as well as considered the alternatives; however, if you haven’t made a decision yet there are factors that you may wish to take into account before making a decision. Typically, if you are in enough financial trouble to consider bankruptcy then your credit rating is likely already suffering. If, however, you have managed to maintain a decent credit score then the effect a bankruptcy will have on your score is a valid consideration. Typically, your credit rating will drop when you file for bankruptcy if your file a chapter 7. How much it drops will depend on many factors. The good news is that your credit rating may start to rebound as soon as the bankruptcy is discharged in the case of a chapter 7 bankruptcy. A chapter 13 bankruptcy filing may negatively impact your

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credit rating but it will not typically have the same impact as a chapter 7 filing because a chapter 13 calls for you to repay your debts. You may also wish to consider what type of debt you need to bankrupt. Some debts, such as student loans and child support, cannot be discharged through a bankruptcy. Be sure that your debts can be discharged before making the decision to file for bankruptcy.

CHOOSING AN ATTORNEY Once the decision has been made to pursue bankruptcy the next step should be to choose an attorney. Technically, there is no legal requirement that a debtor be represented by an attorney when filing for bankruptcy; however, given the complexity of the subject matter, the importance of the outcome, and the sheer volume of paperwork involved it is a wise decision to retain the services of an experienced bankruptcy attorney.

CHOOSING A CHAPTER The US bankruptcy code is divided into chapters. It is for this reason that we refer to the type of bankruptcy that someone files as a "chapter 7" or "chapter 13". There are four different chapters under which an individual debtor may file for bankruptcy-chapters 7, 11, 12, and 13. Although available to an individual, a Chapter 11 is typically used by small businesses. A chapter 12 bankruptcy is for family farmers and fishermen. That leaves chapters 7 and 13. A chapter 7 bankruptcy is known as a

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"liquidation" because a debtor’s nonexempt assets are sold by the trustee to provide liquid assets with which to repay creditors. A chapter 7 bankruptcy requires a debtor to pass a "means test". In short, the means test compares your income to that of other similar households in Ohio. If your income is at or below the median income for similar households then you may file a chapter 7 bankruptcy. At the end of the chapter 7 bankruptcy the majority of your debts will be discharged, or forgiven. A chapter 13 bankruptcy is typically used by debtors with above average income and/or who have valuable assets that they wish to retain. In a chapter 13 bankruptcy you will be required to create a repayment plan that will allow you to repay the majority of your debts over an extended period of time-usually three to five years.

GATHERING DOCUMENTS There are a number of documents and records that you will need to put together in order for your attorney to prepare the bankruptcy petition and all of the required schedules. While the required documents will vary from one debtor to another some common documents and records include: Income tax returns Pay stubs or 1099s Deeds and titles Loan documents Creditor names and addresses

TAKING THE CLASS Before you are allowed to file your bankruptcy petition you must complete a credit counseling class. There are several ways that you may complete the class including an online option. There is a small fee required for the class. You must provide proof of completion along with your bankruptcy petition. You are also required to complete a debtor education class which

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must be taken after you file but before the bankruptcy is discharged. The options for completing this class are typically the same as the credit counseling class.

FILING THE PETITION When you have completed the class and gathered the required documents you will meet with your attorney to begin preparation of the petition. The petition essentially just asks the court to grant you relief from your debts pursuant to the US bankruptcy code. There are number of schedules that must also be prepared and attached to the petition. These schedules include things such as creditor information, income information, and asset information. Once the petition and schedules are ready you will sign them and they will be filed with the appropriate U.S. Bankruptcy Court. As soon as the petition is filed the court will grant an automatic stay. The automatic stay is a court order that prohibits creditors from attempting to collect on a debt. This includes all debtors and all debts. Every creditor listed on your schedule of creditors will be notified of the automatic stay.

341 HEARING In both a chapter 7 and chapter 13 bankruptcy you will be required to attend a "341 hearing". Named for a section of the bankruptcy code, the 341 hearing is also referred to as the meeting of creditors. The meeting is typically held in either an informal office located in the federal courthouse

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or at the trustee's own private office. It will not take place in open court at any rate. In fact, if you file a chapter 7 bankruptcy you will typically never set foot in a courtroom. The purpose of the meeting of creditors is to allow creditors to examine you under oath regarding your income, debts, and assets. In a chapter 7 bankruptcy it is not uncommon for none of the creditors to appear at the meeting of creditors. In a chapter 13 bankruptcy there is a higher likelihood that creditors will appear for the 341 hearing, particularly if you have secured debt included in your bankruptcy. You and your attorney will prepare ahead of time for the meeting; however, the questions are usually simple enough to answer as they usually relate to information that has already been included in your bankruptcy.

REAFFIRMING SECURED DEBTS Some debts are secured by collateral, such as a mortgage loan or a car loan. In a chapter 7 bankruptcy you will need to decide what you plan to do about any secured debts. If you decide that you wish to keep the asset used as collateral than you will need to reaffirm the loan. Essentially, this means that you'll execute a document known as a reaffirmation agreement which states that you plan to continue making the payments on the original loan. This protects your collateral but also means that you will still be legally responsible for paying the debt after your bankruptcy is discharged.

RE-PAYMENT PLAN (CHAPTER 13) If you filed a chapter to the bankruptcy your actual involvement in the bankruptcy process is complete at this point in time as a general rule. If you filed a chapter 13 bankruptcy you will need to prepare a repayment plan at this point. This involves determining what your monthly income is as well as necessary expenditures such as housing, food, and utilities. You will then determine how much money you have each month available to repay creditors. Each creditor will then receive a percentage of that money based on the amount you owe that creditor and what priority the creditor

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has in the bankruptcy. When the repayment plan has been approved you will send one monthly payment to your trustee each month whe will then distribute the funds among your creditors.

RE-PAYMENT CONFIRMATION HEARING After your repayment plan has been created by you and your attorney you will submit it to the bankruptcy court. The court will then set a confirmation hearing date. On that date you and your attorney will appear in court to review your repayment plan. Once the judge is satisfied that your repayment plan is acceptable the judge will officially approve the plan at which point you will begin making your monthly payments to the trustee. If you file a chapter 7 bankruptcy your bankruptcy is typically discharged about 60 days after the meeting of creditors. Typically, the entire chapter 7 process only takes about four months. When your bankruptcy is officially discharged all of your debts (except those that are non-dischargeable) are forgiven, meaning you are no longer legally obligated to pay them. If you file a chapter 13 bankruptcy the case will remain open during the length of your repayment plan-typically three to five years. At the end of your repayment plan any remaining debts that are eligible are usually discharged, or forgiven. Now that you have a general understanding of the steps involved in the bankruptcy process it should ease some of the apprehension you had about the process.

United States Courts, Bankruptcy Basics NOLO, A Chapter 7 Bankruptcy Overview NOLO, Steps in a Typical Chapter 13 Bankruptcy Case

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About the Author Scott R. Needleman The Needleman Law Office 5300 E. Main, Suite 109 Columbus, OH 43213 614-575-1188 http://thecolumbusbankruptcylawyer.com/

Every associate at The Needleman Law Office is committed to handling your case in both a personal fashion and in a professional manner. In other words, we treat you the way we would want to be treated. We will take a personal interest in your situation, making sure you understand exactly what is happening and what options you may have. Then we’ll fight to ensure the best possible outcome for your situation.

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The Bankruptcy Process - A Step by Step Guide  

Understand the bankruptcy process in Ohio before getting started with your bankruptcy petition

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