This page will help you know what to expect as you move through the bankruptcy process.
There are several stages in the bankruptcy process. Each stage is important to the successful conclusion of your bankruptcy which will result in a valid discharge of your debts. The granting of a Discharge of Debts is the goal you are working toward when you file bankruptcy. A discharge means you are no longer obligated to pay the discharged debts and you can rebuild your financial life. A dismissal can result from failure to properly comply with the rules along the way and may force you to start over or seek an order from the Court reinstating your case once you have cured the problem causing a dismissal.
- Document gathering
- Pre-Bankruptcy Credit Counseling
- Petition preparation and review
- Filing the bankruptcy case
- Protection from creditors
- Trustee questionnaire and request for documents
- Post-Bankruptcy Debtor Education on Personal Financial Management
- The Meeting of Creditors
- The Bankruptcy Discharge
1. EVALUATION BY AN ATTORNEY:
At The Moak Law Firm we invite you to have a free consultation to evaluate your financial situation to determine if you are a good candidate for debt relief through bankruptcy. Some circumstances may not justify filing bankruptcy because not all debts are eliminated by bankruptcy or because the benefits of bankruptcy are not sufficient to justify the cost. It is also possible that you may not qualify for bankruptcy if you have obtained a prior bankruptcy discharge from a bankruptcy filed within the last eight (8) years. Mr. Moak will conduct the interview and has the experience necessary to determine if you are a good candidate for bankruptcy. Recommendations will also be made to indicate which type of bankruptcy (chapter 7 or chapter 13) will best serve your needs.
During the interview you will be asked questions to identify and classify the following:
- Your income, especially that income received during the last 6 months which will determine if you are over or under the median income for the size of your household. We need to consider income from all sources:
- Wages or salary converted to a monthly average
- Business income such as investments or rental property
- Retirement pension income
- Social Security or other government benefits such as food stamps
- Contributions from others received on a regular basis
- Child support or spousal maintenance
- Your total debts which are classified in the following categories:
- Unsecured debts such as credit cards, bank loans not tied to collateral, personal loans, or even business loans which you have guaranteed.
- Secured debts such as car loans, home mortgages, and lines of credit secured by property. All secured debts are tied to some type of property or collateral. A secured debt may be the result of agreements you made, which are called “consensual liens” or which come into existence by operation o f law such as tax liens, judgment liens, materialman liens or workman’s liens.
- Priority debts such as most tax debts, child support obligations, or spousal maintenance obligations or other court ordered payments such as restitution orders.
- Debts are also divided between consumer and non-consumer debts. This is important because if your debts are not primarily (more than 50%) consumer debts, you will not have to take the means test regardless of your income level.
- Consumer debts are those incurred for personal, household or family purposes, including:
- The mortgage debt on your primary residence
- The HOA debts for dues, assessments and fines are secured debts.
- The debt owed to the finance company providing the money for you to buy a vehicle.
- The debt owed to a title loan company which has perfected its lien right by putting its name on the title of your vehicle.
- Education loans
- Non-consumer debts are those which were not incurred for personal, household or family purposes and includes:
- Tax debts
- Business debts (including mortgage debts on investment property) or debts incurred for the purpose of creating income.
- Judgments for debts arising from torts such as motor vehicle accidents, slander and other civil offenses are non-consumer debts.
- Consumer debts are those incurred for personal, household or family purposes, including:
- Average monthly household expenses but not including the monthly payment obligations on debts that will not survive the bankruptcy. So, credit card payments, or other loans which are not tied to collateral which you plan to keep are not included in your monthly household expenses.
- Identification and classification of your assets which are divided between those which are exempt and those which are not exempt.
- Exempt assets are those which the laws of the state give protection from creditors. Determination of those assets which are exempt is complicated and requires careful examination by a competent bankruptcy attorney.
- Non-exempt assets do not have protection from creditors and may be taken by the bankruptcy trustee if you file bankruptcy. Your attorney may help with providing strategies for how you can convert some non-exempt assets to exempt status prior to filing your bankruptcy case.
You will also be asked questions about your financial affairs to identify transfers of property or debts which you have paid in the past. Of particular importance is whether you have transferred assets for less than fair value to avoid those assets being within the reach of your creditors. It is also important to look back over the last year to determine if you have paid money to any family members, close friends or business associates which can be identified as “preferential transfers.” The trustee can undo such transfers or require you to make payments to the bankruptcy estate to compensate for such payments or transfers.
During your consultation with the attorney you will need to make a decision about the services offered by the attorney and payment of fees for those services. At The Moak Law Firm we offer affordable payment plans and suggestions regarding how the fees might be paid. Fees must be paid prior to the filing of the bankruptcy case.
2. DOCUMENT GATHERING STAGE:
You will be given a list of documents to gather for use by your attorney to prepare your bankruptcy petition, schedules and statements. A copy of the checklist necessary documents is available at the link below. You should make two copies of the documents which apply to you and provide one copy to the member of your attorney’s bankruptcy team and MAKE A SECOND COPY FOR USE LATER WHEN YOU RESPOND TO THE TRUSTEE’S REQUEST FOR DOCUMENTS. Download the Necessary Documents Checklist.
3. PRE-BANKRUPTCY CREDIT COUNSELING:
Prior to filing bankruptcy all filers must complete credit counseling from an authorized credit counseling agency. At The Moak Law Firm we simplify this step in the process by arranging for you to take the credit counseling on the computer which will usually take about 60 to 90 minutes of time. The law firm must have a copy of the certificate to file with the bankruptcy papers with the Court. Failure to complete the credit counseling prior to filing the case will result in dismissal. The certificate is good for only 180 days and will expire if the bankruptcy case is not filed within 180 days from the date of completion.
4. PETITION PREPARATION AND REVIEW:
Using the information on your completed questionnaire and the documents on the above checklist along with the imported list of creditors from a recent Consumer Liability Report from the three (3) major credit reporting agencies (Equifax, Experian and Transunion), a draft copy of your petition, schedules and statements is prepared for your review. A pdf copy is sent to you by email and you are invited to review and make corrections or additions. We ask that you carefully review the full petition, schedules and statements which consist of approximately 50-60 pages containing your financial information. We also will provide copies of signature pages which you will need to sign along with a confirmation of your social security number and address. You will also need to sign a Declaration Re: Electronic Filing which confirms that you have given The Moak Law Firm authority to file your bankruptcy case.
5. FILING THE BANKRUPTCY CASE
The petition, schedules and statements are prepared for electronic filing with the Court. The process of filing involves submission of electronic copies of pdf documents containing your bankruptcy petition, schedules and statements. The information is retrieved at the Arizona District of U.S. Bankruptcy Court where your case is assigned a bankruptcy case number, a trustee, a judge and is calendared for a Meeting of Creditors at which you will be examined under oath.
6. PROTECTION FROM CREDITORS – THE AUTOMATIC STAY ORDER
The Clerks at the Bankruptcy Court also arrange for notification of all of those creditors listed on your schedules that you have filed for bankruptcy protection and that all collection activity by any of those creditors must stop. That means that creditors are ordered to stop calling you, stop sending you collection letters, stop any attempts to foreclose against your property or repossess any property. The Creditors must also refrain from filing any lawsuits against you, discontinue prosecuting any pending lawsuits, stop garnishment of wages or any other collection efforts. The notification is sent to the creditors at the address on the schedules and if that address is incomplete or invalid, the creditors will not receive notice of your bankruptcy and therefore protection from those creditors not notified is at risk. This protection issued by a Bankruptcy Judge is called the “Automatic Stay Order.” The protection from your creditors is strong but whether that protection will continue and become permanent depends upon your cooperation during the remaining steps in the bankruptcy process.
7. TRUSTEE QUESTIONNAIRE AND REQUEST FOR DOCUMENTS
The trustee assigned to your case will receive a copy of your bankruptcy forms and review them. The trustee will send you a letter at the address listed on your bankruptcy papers. That letter will contain instructions to complete a questionnaire and provide copies of certain documents. The letter will be mailed directly to you and not to your attorney. You will always be asked to send the trustee a copy of the most recent state and federal tax return you have filed. Failure to deliver the tax returns requested at least 7 days prior to the meeting of creditors can result in your case being dismissed. If you have not received such a letter and it has been more than 14 days since your case was filed, contact the trustee’s office to request a copy be sent to you.
8. POST-BANKRUPTCY PERSONAL FINANCIAL MANAGEMENT COURSE
At any time after your case is filed but at least within 45 days after the Meeting of Creditors, you must complete the required course on Personal Financial Management. At The Moak Law Firm, we make arrangements for you to complete this course on the computer or over the telephone. You will need your bankruptcy case number. The time needed to complete this course is typically a little more than 60 minutes. The certificate is issued and sent to you and to The Moak Law Firm which will file the certificate with the Court. You can take the course before or after the Meeting of Creditors but the certificate must be filed with the Court within 45 days after the Meeting of Creditors or there is a danger that your case will be closed without a discharge being issued. You may get solicitations from other vendors trying to get you to use their agency for completing this course. However, you should check with your paralegal at The Moak Law Firm because arrangements have already been made for you with a qualified agency.
9. THE MEETING OF CREDITORS (“MOC” OR “§341 MEETING”)
Although this meeting is called the “meeting of creditors,” that name may be misleading because in practice it is rare that any of the creditors show up at such meetings. While the creditors are invited and given the opportunity to attend the meeting to ask you questions they hardly ever show up. The trustee assigned to administer your bankruptcy case will receive a copy of your bankruptcy forms filed with the Court. Those forms, the documents you are requested to send the trustee and your completed questionnaire will give the trustee most of the information the trustee will need to complete the trustee’s report filed after the Meeting of Creditors. However, the trustee will ask the standard questions which are contained in the Trustee’s Handbook.
This is a mandatory meeting. You must bring a photo ID and proof of your Social Security number. The trustee will ask whether or not the information in the bankruptcy petition is true and accurate. The trustee will ask about nonexempt property that can be sold to satisfy creditors. They might even ask about money that was transferred or payments made before you filed bankruptcy. You are invited to watch a short video about the Meeting of Creditors. Your attorney will attend the meeting and meet you just prior to the scheduled meeting.
10. THE BANKRUPTCY DISCHARGE
The law allows the creditors a period of sixty (60) days from the first date set for the Meeting of Creditors to file objections to your receiving a discharge. It is very rare that any objections are filed but the discharge of your debts, the permanent order restraining the creditors from attempting to collect any debt from you, cannot be issued until after the sixty (60) day time period has expired. Typically, within a couple of weeks after the Meeting of Creditors, the Court will issue the “Discharge of Debtor(s).” The discharge will be mailed to the address on record with the clerk of the court and you should keep this document as a permanent record.
Call 480-755-8000 to speak with our Arizona bankruptcy attorney today for immediate help.