Filing for bankruptcy is a decision that should not be taken lightly. While many hardships that lead to bankruptcy may be unexpected, it still deserves an evaluation of personal responsibility, if only to help one prepare to avoid such a happenstance in the future. However, once you are inflicted by hardship and you have done that analysis, bankruptcy can certainly be a tool to help get you back on the right financial path. There can be some negative consequences to filing for bankruptcy, particularly if it is not done right; but conversely, there are benefits that may be life-changing in allowing you to start over fresh. Thus, it is important to carefully consider the decision to move forward and important speak to an experienced professional.
Aside from the worry of ramifications, the process of filing for bankruptcy itself may seem overwhelming. You may be wondering, what is the process for filing and can (or should) I do it on my own?
Steps to Filing Bankruptcy in Pennsylvania
- Collect Financial Documents
You’ll need all your financial information, including:
- Proof of all income sources for the household for the last 6 months
- Debt information including name, address and balance, for all types of debt – a lot of this can be obtained by pulling a current credit report, but more may be needed
- Asset identification and valuation including real estate, vehicles, household goods, life insurance, retirement, potential causes of action and anything else of value
- Tax returns for the last two years
- A list of your monthly expenses
- Any other major financial transactions or information such as foreclosure papers or judgment documents
Once you’ve gathered the necessary documents and information, it’s in your best interest to reach out to a bankruptcy attorney. Bankruptcy law can be complex. The right bankruptcy lawyer will help you understand your options, recommend which type of filing is appropriate for your circumstances and in your best interest, and ultimately help you navigate the process.
There are primarily two types of bankruptcy that are most commonly associated with individual consumers – Chapter 7 and Chapter 13.
- File Bankruptcy Paperwork
Once you determine whether you’ll file for Chapter 7 or Chapter 13 bankruptcy, you or your attorney will complete the paperwork. The documents you’ll be required to submit include a petition, and other documentation that paint a comprehensive picture of your financial situation.
As you compose your petition and paperwork, be completely honest. Be sure to fully disclose any large financial transactions. Transparency will put you in a favorable position with the court and creditors who are a part of your bankruptcy case. There are also state-specific exemptions to protect the property that you do have and that an experienced bankruptcy lawyer can assist you with.
- Complete Requirements based on Chapter 7 or Chapter 13 Bankruptcy
Depending on the type of bankruptcy you file, there will be additional documents required. Be sure to file all necessary paperwork for your type of filing.
- Automatic Stay is in Place
As soon as your petition is filed, an automatic stay of any collection action is put in place and any creditors that you are in debt to are not allowed to contact you to attempt to collect debts. This also means any foreclosures may not proceed against you, any repossessions are halted and any civil lawsuits must be stopped until they can be reviewed by the Bankruptcy Court.
- Appointment of a Trustee
The courts will appoint a trustee to oversee your case. The trustee is responsible for challenging any areas of your filing if they see a problem. The trustee is also responsible for ensuring that the creditors who are owed receive as much payment as is determined to be fair and reasonable given your circumstances.
The trustee will arrange a meeting with the creditors, and the creditors will have the opportunity to question you and to object to anything they believe is inaccurate. In a Chapter 7 the trustee will then go on to sell any assets that you have not been able to exempt, if there are any, and pay back creditors if applicable. In a Chapter 13 the trustee will administer your monthly payments that have been determined either based upon what assets you have not been able to exempt, or based upon your income and budget.
When is my Bankruptcy Case Over?
There are different time frames for a bankruptcy case to be closed, depending on the type of bankruptcy. In a Chapter 7 bankruptcy, you can expect everything to be completed in about six months, while a Chapter 13 bankruptcy can generally take three to five years.
If you have questions about filing for bankruptcy or need legal support to guide you through the next steps, reach out to me. This can be a scary time and you don’t have to go it alone. Contact my office to schedule a judgment-free consultation today.
Author: Tracy Updike, Esq.