Below is an overview of the bankruptcy process in Pennsylvania. This is a guide to help you understand the different steps involved in a typical bankruptcy case filed in the United States Bankruptcy Court for the Eastern District of Pennsylvania.
1.) Initial Consultation
During the initial consultation, we will discuss the reasons you are considering filing bankruptcy and discuss whether you’ll want to file a Chapter 7 or Chapter 13. Most people who want to eliminate credit card debt wish to file a Chapter 7 since debtors can obtain a discharge of all debts without requiring repayment to creditors. However, your income must be under a certain level depending on your household size. If your income is too high, you would be required to file a Chapter 13, which requires you to propose a payment plan to repay creditors. You’ll also want to consider a Chapter 13 if you are behind on your payments for secured debts such as a mortgage or car loan and want to keep that property.
2.) Gather Financial Documentation
If you’re interest in filing bankruptcy, you will want to begin gathering financial documentation such as proof of your income and debts. You will need your two most recent tax returns; proof of all income over the previous six months (paystubs, social security benefits award letter, etc.); recent bank account statements and retirement account statements; copies of recent mortgage statements, car loan statements, credit card statements, and collection letters; and court documents if any lawsuits have been filed against you.
3.) Completing Bankruptcy Worksheets
At the initial consultation, I will provide you with a set of forms for you to complete which will assist me with completing your bankruptcy petition. I will need to obtain information about items such as your assets, income, and expenses. You will also need to answer a few questions about the status of your financial affairs such as what creditors you’ve recently paid, whether you’ve sold any property recently, and whether any lawsuits have been filed against you.
4.) Credit Counselling Course
Before you are able to file bankruptcy, you will be required to complete a credit counselling course which is completed online. It takes approximate 30-60 minutes and asks you for information about your income and expenses.
5.) Reviewing the Bankruptcy Petition
Once the credit counselling course is completed and the bankruptcy petition is prepared, we will schedule a meeting to review the Petition to sign all the required documents. The Petition must be signed under penalty of perjury that all the statements made on the Petition are true and correct to the best of your knowledge.
6.) Filing the Bankruptcy Petition
Following our meeting to sign the Bankruptcy Petition, I will electronically file the bankruptcy petition. The court will then send notices to all of the creditors listed on the bankruptcy petition notifying them that a bankruptcy petition has been filed. As soon as the bankruptcy petition is filed, the debtor is protected by the bankruptcy court’s automatic stay which prohibits creditors from taking any steps to collect a debt. Creditors cannot call you, send you statements, or file lawsuits against you. Any lawsuits that have already been filed will be stopped.
7.) Meeting of Creditors
After the bankruptcy petition is filed, you’ll be scheduled for a Meeting of Creditors. In a Chapter 7, the Meeting of Creditors takes place about 4-6 weeks after the Petition is filed. In a Chapter 13, the Meeting of Creditors takes place about 2-3 months after the Petition is filed. Although it’s called the Meeting of Creditors since creditors receive notice of this meeting, rarely (if ever) do creditors actually show up. Rather, the Meeting usually turns out to be just a very brief meeting with your Bankruptcy Trustee. The Trustee simply needs to ask you a few questions under oath to verify that the information on the bankruptcy petition is correct.
8.) Plan Confirmation (Chapter 13 Only)
In a Chapter 13 case, the Chapter 13 Plan which was filed must be approved by the bankruptcy judge. The Chapter 13 Trustee and creditors have the ability to file objections to the plan if it does not meet the requirements of the Bankruptcy Code. If objections are filed, they will have to be resolved with the objecting party or the plan will have to be amended in order to resolve the objection. The debtor is required to commit all disposable income to fund the plan. Once the plan is approved, the Trustee is directed to distribute payments to creditors in accordance with the plan.
8.) Financial Management Course
Before a debtor can receive a discharge, a debtor is required to complete a second financial management course, which is also completed online. This course is called the “ticket out of bankruptcy” and is required to be completed in order to receive a discharge.
9.) Discharge Order
Once the court enters a discharge order, almost all debts listed on the bankruptcy petition get discharged. Some debts such as child support, spousal support, taxes, fines owed to government entities, and student loans do not get discharged. Additionally, any debts that were omitted from the bankruptcy petition do not get discharged.
Questions About Bankruptcy?
If you have questions or are interested about filing bankruptcy, please contact me at (484) 362-9286. Zachary Zawarski is a bankruptcy attorney practicing in the Lehigh Valley. His office is conveniently located in Bethlehem, PA.
Our attorneys are considered Debt Relief Agents and our firm is a Debt Counselling Agency.