The process of filing for bankruptcy in the US is an elaborate affair complete with various rules and regulations. The lawyers are the most important entities as they are very helpful during the bankruptcy process.
Steps in Bankruptcy Filing in US
There are certain important steps that must be regarded when filing for bankruptcy.There are many alternatives to bankruptcy. Bankruptcy is considered the last resort.
The Bankruptcy Abuse Prevention and Consumer Protection Act helps debtors to find other solutions. Before filing for bankruptcy an applicant must seek credit counseling services at least 180 days before applying for bankruptcy.
While filing for bankruptcy,applicants should never use their credit cards as creditors might object to this. If an applicant continues to use their credit cards they would not be declared bankrupt and would need to pay off their debt.
Types of Bankruptcy Filing in US
There are two predominant types of bankruptcy in which cases are filed under: Chapter 7 and Chapter 13. Under Chapter 7 the properties of the debtor are sold off or liquidated in order to pay off the debts. The cases filed under Chapter 13 provide the debtors with an extended period to pay their loans back.
The Bankruptcy Abuse Prevention and Consumer Protection Act has made it tougher to get a bankruptcy case filed under Chapter 7. It is assumed that more people will be filing under Chapter 13 as a result of this.
Under Chapter 7 the trustees will determine if the borrower has any assets that are capable of being liquidated. If the assets are exempt a report of no distribution would be filed at the bankruptcy court.
If the assets are declared non-exempt they would be liquidated and the proceeds would be used to pay the debts. In Chapter 13 it would be determined if the debts could be paid off in three or five years.
Role of Lawyers in Bankruptcy Filing in US
Lawyers have a very important role when filing for bankruptcy. Bankruptcy applicants should do comprehensive research for a professional lawyer before they file. Together, the lawyers and the applicants will go through the case. Lawyers will look at the financial status of the clients and decide the suitable Chapter. They will also assist the debtors while they go through various owing to means tests. After the automatic stay is in effect the lawyer will represent the client through the trial.
Expenses of Lawyers in Bankruptcy Filing in US
Each lawyer has their own fee that they charge for their services. The average fee for a bankruptcy lawyer in US is $1,700. If a bankruptcy case is filed under Chapter 7 the applicant must pay a share of the lawyers fee at the time of the case filing.
The automatic stay is an order by a court that is presiding over a bankruptcy case. Once the automatic stay is in effect the creditors are prohibited from getting in touch with the debtor. If this rule is breached they may be penalized financially.
The 341 meeting is when the creditors and debtors meet after the bankruptcy case has been filed. Normally the debtor is notified through e-mails. Before the 341 meeting the lawyers should go through the files as well as the sample questions that would be asked by the creditors.
The 341 meetings usually last ten minutes. These meetings serve to guarantee the truthfulness of the answers provided by the debtor. The trustees can also be assured that the bankruptcy applicant understands the implication of and is willing to face bankruptcy.
Bankruptcy Discharge in the US
There are different rules for bankruptcy discharge in the US. For Chapter7 cases the notification period of discharge is sixty days. For cases that are filed under Chapter 13 the period of discharge is thirty to sixty days. These dates are subject to a petition from the creditor within a period of sixty days from the 341 meeting.
Under Chapter 13 the trustee has to be sure that the scheduled payment plan has been followed. There are certain debts, such as student loans and taxes, that are not discharged in bankruptcy.
Last Updated on : 10th July 2013