5 Basic Things That Typically Happen During Every Bankruptcy Process

The exact bankruptcy process may vary from one state to another, but there are certain basics that remain the same. Following are the typical five steps that must be followed irrespective of where in the United States of America you are located in.

Gathering Necessary Documents

The very first step is to prepare a list that should contain the details of your monthly income, essential living expenses, assets and properties you own, and the debts you owe to different creditors. Once you do that, you must gather all necessary documents, which you can show in support of your claim – to ensure that the details you have provided are correct and complete to the best of your knowledge. The documents may include a copy of tax return filing, bank statement, pay slips, receipts of utility bills and other essential expenses, loan agreements, loan statements, receipts of debt payments you have made, and an array of other such things. Always remember, how smooth the bankruptcy process is going to be will depend very much on how prepared you are.

Filing A Petition

The next step is to file a petition in a bankruptcy court. As part of the process, you will have to fill out several forms. At this stage, you may need some legal assistance to make sure that you complete the paperwork thoroughly without making any mistakes. Sometimes, a petition may be rejected straightaway if a particular formality is not fulfilled properly. A lawyer who is an expert in handling bankruptcy cases can double-check everything to avoid any unpleasant surprises. Here’s a list of before filing for bankruptcy. 

Automatic Stay

As soon as your petition is accepted, an “automatic stay” is imposed automatically as part of the bankruptcy process, which means no collection calls can be made to you or simply you just cannot be contacted (let alone be forced) to make the repayment on your debts as long as the court proceedings are on and until a final judgment comes in. Even your home cannot be foreclosed during this period, even if you are far behind your mortgage payments.

The Court Appoints A Trustee

Once a petition is filed and accepted, the court will appoint a bankruptcy trustee. After this appointment, the court assumes legal control of all your assets, properties, and debts. The main task of the trustee is to review the paperwork submitted by you and verify all the details. If they find anything improper, incorrect, or incomplete, they can file an objection and challenge that particular aspect of your petition.

The Debtor Is Asked To Attend A Creditors Meeting

About 30 days after your petition filing, the court-appointed trustee will ask all your creditors for a meeting. You will also be asked to attend this meeting. This step of the bankruptcy process is crucial, as it decides whether the issues can be resolved through talks and negotiations or the resolution must come through court proceedings. If all attempts by trustee to reach a mutually agreeable solution fail, the court proceedings will start, at the end of which the judge will listen to all the parties and then will render a final decision in this regard.

Overall, when you know what to expect during a bankruptcy process, decision-making can become a little easier for you.

Filed under Bankruptcy, Bankruptcy Basics