The Bankruptcy Process

Bankruptcy is an opportunity for individuals and businesses to achieve a fresh financial start. However, bankruptcy can be a time-consuming, complex, and demanding process, but the benefits are worth it.

Our attorneys help clients file for:

• Chapter 7
• Chapter 11
• And Chapter 13 bankruptcy

All of these types of bankruptcies involve different eligibility requirements and processes, and may only be available to certain parties. As such, we want to provide you some clarity before you file for bankruptcy. You should know which type of bankruptcy is available for your particular circumstances and how to prepare for and navigate the process thereafter.

For these reasons, we summarize the bankruptcy processes for Chapter 7, Chapter 11, and Chapter 13 filings below. If you have any questions, please reach out to Lansing Roy, P.A. online or at (904) 574-5499 to schedule a free consultation!

What the Chapter 7 Bankruptcy Process Looks Like

Also known as liquidation bankruptcy, Chapter 7 relief is available to individuals who want to get most, if not all, of their unsecured debts discharged.

Unsecured debt can include:

• Credit card balances
• Signature loans
• Medical bills, etc.

Individuals filing for Chapter 7 bankruptcy are subject to the means test, which you can learn more about when you click here. You should consult with a lawyer to determine if you are eligible for Chapter 7 bankruptcy before beginning the process.

Once your attorney verifies that you are eligible, you can begin the Chapter 7 bankruptcy process, which consists of the following steps:

File the petition and related documents: You will file the petition and related documents with the bankruptcy court serving the area in which you live. The case trustee assigned to your case will ask for additional documents, including a copy tax returns.

The related documents, in addition to the petition, include:

• Schedules of assets and liabilities
• A Statement of Financial Affairs
• A Statement of Intentions
• The Means Test calculation

These documents are very important to your case and must be completed accurately. Hiring an experienced bankruptcy attorney will insure you complete the documents correctly and in a manner best suited to provide for a successful outcome of your case.

Additionally, if you owe mostly consumer debts, you must complete and receive a certificate from an approved credit counseling agency.

Meeting of creditors: Between 30 to 40 days after you file your petition and related documents, a the trustee will hold a meeting of creditors, where the trustee will put you under oath before asking questions about your financial affairs and the documents you filed with the court.

Debtor education course: To obtain a discharge of your debts, you must complete a debtor education course after filing and before receiving the discharge. Once completed, you must file the certificate of completion with the court.

Debt discharge: Approximately 3 to 4 months after filing, you will be notified of your bankruptcy discharge. This deadline can be extended in certain circumstances, which may delay your discharge.

How Does the Chapter 11 Bankruptcy Process Work?

Chapter 11 bankruptcy allows for the reorganization of a individual’s or business’s debt, although, it is notorious for being the most complex and expensive form of bankruptcy. This is why both individuals and business owners are advised to consult with a lawyer before opting for this form of relief.

Chapter 11 bankruptcy allows businesses to keep their doors open and pay creditors over time, allowing the debtor to:

• Remain “in possession, obtain the powers and duties of a trustee
• Continue business operations
• And borrow new money upon the court’s approval”

Additionally, Chapter 11 allows individuals with investments or business operations like rental properties to protect their investments while restructuring their debts. If you no longer wish to continue in business, Chapter 11 is an alternative to a Chapter 7 liquidation that provides a method for your to orderly wind down operations and complete operations without just closing the doors or having a creditor’s collection efforts abruptly halt your ability to operate.

Chapter 11 cases vary in complexity with the size and nature of the business, and different requirements and options exist for small businesses (such as a Subchapter V election) and individuals as compared to large organizations.

With that being said, the Chapter 11 bankruptcy process generally involves the following steps:

File the petition and related documents: Individuals or businesses must file the petition and related documents with the bankruptcy court serving the area they live or work in.

The related documents, in addition to the petition, include:

• Schedules of assets and liabilities
• And a Statement of Financial Affairs

There are additional documentary requirement depending on whether the case was filed by an individual or business.

Monthly operating reports: During your Chapter 11 case, you must file informational reports such as monthly operating reports with the court, which should include your income and expenses for the particular month. This step is important because it demonstrates to creditors, the court, and the US trustee whether or not your reorganization plan will be feasible.

Debtor interview: You will attend an initial debtor interview with the US Trustee’s Office, where they will evaluate your situation, ask about your business plan, and explain your debtor obligations.

Meeting of creditors: You must then attend the meeting of creditors, which occurs about 30 to 45 days after you file your Chapter 11 bankruptcy petition. You will be placed under oath before being questioned by the US Trustee and creditors about your petition.

Disclosure statement hearing: You must complete a written disclosure statement and plan of reorganization. The disclosure statements will contain information about your assets, liabilities, and business affairs so that the creditor can properly evaluate your reorganization plan. At the disclosure statement hearing the court will determine whether your disclosure statement should be approved.

Confirmation hearing: Once your disclosure statement is approved, the court will hold a confirmation hearing to determine whether or not to confirm the plan of reorganization under Chapter 11. You must receive enough votes of acceptance from your creditors to get the judge’s approval.

Start making payments: Upon confirmation of your reorganization plan, you will begin making payments to creditors as outlined in your plan. These payments can last for months or even years, and once you make all the required payments, your lawyer can work to get your remaining unsecured debts discharged.

What Is the Chapter 13 Bankruptcy Process?

Chapter 13 bankruptcy is also called reorganization, which allows debtors earning a regular income to repay all or part of their debts as long as their unsecured debts are less than certain thresholds outlined in the Bankruptcy Code.

The eligibility requirements for Chapter 13 bankruptcy are generally the same as those for Chapter 7, with the main differences being WHO can file and the amount of their secured and unsecured debts. It is always best to consult with a lawyer to determine your eligibility for Chapter 13 bankruptcy.

Once you confirm you are eligible, you will undergo the chapter 13 bankruptcy process, which looks like this:

File the petition: As with Chapter 7, you will file your Chapter 13 bankruptcy petition and related documents with the court serving the area you live in.

The related documents, in addition to the petition, include:

• Schedules of assets and liabilities
• A Statement of Financial Affairs
• A Chapter 13 Plan

These documents are very important to your case and must be completed accurately. Hiring an experienced bankruptcy attorney will insure you complete the documents correctly and in a manner best suited to provide for a successful outcome of your case.

Additionally, you must complete and receive a certificate from an approved credit counseling agency. You must also provide your case trustee with documents they request, including a copy of your tax return(s) and proof of income.

Meeting of creditors: Between 30 to 60 days of filing your petition, your trustee will hold a meeting of creditors, where you will be placed under oath and asked questions about your financial affairs and the proposed terms of your repayment plan.

Make plan payments: Even if your plan has not yet been approved, you must begin making plan payments to the trustee within 30 days of filing the bankruptcy case.

Confirmation hearing: After a maximum of 45 days after the meeting of creditors, a judge will hold a confirmation hearing and determine whether the repayment plan is viable and meets legal standards. If the plan is approved , known as “confirmed”, the trustee will distribute funds according to the plan “as soon as is practicable.” If the plan is not approved and the case is dismissed, the court will allow the trustee to keep some funds for certain costs incurred during the process but may require them to return all remaining funds to you.

Debt discharge: Chapter 13 discharges are highly complex, which is why you need a lawyer to consult you during this process. Generally, though, you are entitled to a discharge after completing all the payments under the plan as long as you:

• Certify (if applicable) that you paid all domestic support obligations
• Have completed an approved course in financial management

Get Started on the Bankruptcy Process Today

If you are considering filing for bankruptcy, retain our experienced attorney for all your legal needs. Every step of the way, you can count on us to guide you through the process, explain your rights, negotiate for your best interests, and work tirelessly to help you achieve the fresh financial start you need and deserve.

Have more questions about the bankruptcy process? Our firm is here to help. Schedule your free consultation by contacting us online or by calling (904) 574-5499!