Contrary to popular myth, bankruptcy is not a sign of failure. Nor does it irreparably damage your credit. For many hardworking Americans, bankruptcy can simply provide a way to get out from under crushing debt caused by illness, job loss, and other unexpected life emergencies. And it can also give you a fresh financial start.
But how does bankruptcy work? And what happens when you file bankruptcy? If you are struggling to pay your bills or dealing with creditor calls, don’t expect things to magically change. Learn more about how bankruptcy can help by speaking to a Paducah bankruptcy attorney at Farmer & Wright, PLLC today.
Choosing an Experienced Bankruptcy Attorney
The first step in filing bankruptcy is choosing the right attorney. You want an attorney whom you feel comfortable with, and who is familiar with the type of bankruptcy you will be filing.
If you have unique assets, such as a vacation home, or debt types, such as a civil judgment, it’s important to ensure that your attorney has worked on bankruptcy cases with these factors in mind.
Your lawyer can also answer your questions and help you avoid common pitfalls while abiding by bankruptcy laws.
Gathering Financial Documents
Bankruptcy requires you to file information with the federal bankruptcy court. Along with your personal information, you will need to gather documents related to credit reports, bank statements, investments, expenses, and more. Collecting this information can help your attorney have a complete picture of your finances.
Filing a Bankruptcy Case
Once your attorney assesses your financial documents, they can help you determine whether Chapter 7 bankruptcy or Chapter 13 bankruptcy is right for you. In both types of bankruptcy, you will be expected to file a bankruptcy case with a federal court. This is because bankruptcy cases are always federal, as opposed to state, as they involve federal laws.
Common court documents you’ll file for bankruptcy include:
- Bankruptcy petition
- Fee waiver
- Summary of assets
- Schedule of property
- Statement of co-debtors
- Statement of financial affairs
- Debt plan
After You File: The Automatic Stay
Once you file bankruptcy, the court will likely issue an automatic stay, which will stop the calls from your creditors. Once an automatic stay is in place, creditors must contact your attorney or wait for the Meeting of Creditors to address issues with you.
The automatic stay will also put a hold on legal actions against you by your creditors. That includes car repossession or eviction. In some situations, a creditor may continue a legal action against you. In these cases, the automatic stay can buy you time to negotiate with creditors or bring your payments current.
If a creditor calls you after you have filed a bankruptcy, give them your case number and direct them to your attorney. It is illegal for them to contact you once the case has been filed.
Meeting of Creditors
A Meeting of Creditors will be scheduled soon after you file bankruptcy. Your attorney, you, and your trustee will all attend. While creditors are also notified, they rarely attend. In the rare case that a creditor does attend the Meeting of Creditors, it’s usually because they want to challenge the debt or assert fraud. They may also attend in an attempt to obtain money from your bankruptcy plan.
In most cases, however you will go to the meeting and face questions by the trustee without conflict. The trustee will ask you questions about your finances and whether you have filed bankruptcy in the past. You will also have to reaffirm much of the information you submitted with your bankruptcy paperwork. The goal is to make sure all of the information is accurate.
Finalizing Your Bankruptcy
Once the Meeting of Creditors is over, your bankruptcy will be finalized with the bankruptcy court. If you’re filing Chapter 7, your debts will be gathered for discharge. If you’re filing Chapter 13, you will have to present a payment plan. In either case, the court will hold a hearing to finalize these aspects of your case. In most cases, you don’t have to attend this hearing. Your bankruptcy attorney can attend it on your behalf.
Moving On After Bankruptcy
Once you are in a manageable payment plan or your debts have been discharged, you can start rebuilding your credit. Although your credit score may have taken a hit, in time you will be able to restore your credit score, secure loans, and move on with your life.
Learn More About What Happens When You File Bankruptcy
Deciding whether to file bankruptcy can be difficult, especially if you don’t know what happens when you file bankruptcy. For more information about the bankruptcy process, contact Farmer & Wright, PLLC today.