What is the Bankruptcy Process Really Like?

First, you usually start the bankruptcy process by meeting with a lawyer for an interview. Most lawyers offer a free thirty minute consultation. The interview should not really be any less than one-half hour. The lawyer will usually provide you with some forms to fill out, and most sophisticated lawyers have their information gathering forms posted on their websites, like this bankruptcy form, so that you can have things prepared for the lawyer at the time of your first consultation. If you are comfortable with that lawyer, you usually pay a fee deposit at that first meeting of some $200 to $600. The fee deposit can be more, depending on the type of case you are filing and the lawyer’s estimation of complexity, but recognize that most bankruptcy cases really are not horribly complex, so you should not usually have to pay a huge fee up front to “retain” the lawyer.
Couple Working on Finances
Most lawyers want your business, so the lawyer should not have any problem with you going home to “sleep on it” before plunking down any down payment. If you get lots of pressure to pay immediately, perhaps you should be wary of that lawyer. At the first meeting, the lawyer is required by law to provide you with certain written disclosures if he offers to take your case. A lawyer who does not provide the written disclosures for you to take home should be avoided because that means the lawyer either does not know what he is doing, or perhaps even worse, does not respect the Federal law that strictly governs his relationship with you.

Second, in addition to the mandatory disclosures, the lawyer should send you home to gather information, providing you with a list. In Washington State, a modest amount of information needs to be presented to the lawyer’s staff so that the requisite paperwork can be prepared for you to sign.

Third, you complete online “mandatory pre bankruptcy credit counseling” at home. This is an easy to complete tutorial that takes about one hour and fifteen minute to finish. It is done over the internet or over the telephone. A link to directions of how to do “mandatory pre bankruptcy credit counseling” is provided for your reference. It costs about $50.00 per case; a husband and wife filing a bankruptcy case jointly pay only $50.00 as it is a “two fly for the price of one” sort of arrangement. You can pay by debit card or credit card, or make arrangements for payment. If you are truly needy, you can apply for a waiver of the $50.00 fee by contacting the provider to prepare fee waiver paperwork.

Fourth, after your gather the information, you call the attorney’s staff to arrange a date and time to drop of the information that is required to prepare your paperwork. It is then about one to two weeks until your paperwork is ready to sign. When all of the information is dropped off, then the lawyer’s staff works on setting a document signing date and time for you to meet with the attorney once again.

Fifth, at the signing appointment, you come to the office and review the paperwork prior to signing it. You then meet with the attorney to make any corrections or iron out any questions or problems. A signing appointment can last anywhere from 15 minutes to two hours, depending on the complexity of the case. You pay the balance of attorneys’ fees due at the signing appointment.

Sixth, within a few days, the lawyer’s staff files the case electronically to the Court.

Seventh, about six or seven weeks after the case is filed electronically to the Federal Bankruptcy Court, you then attend Court with the attorney at what is called the “341 Meeting of Creditors”. You and your lawyer meet with the Judge’s designee or assistant (called a Trustee). The Trustee and your attorney sit with you around a table and the Trustee asks you some questions to ensure that you are being honest in your documents and that you have not left out any required information. There are usually eight to 12 cases scheduled every hour at Bankruptcy Court for the 341 Meeting of Creditors, so it is rare that you would be questioned for more than four or five minutes.

Eighth, about two months after your 341 Meeting of Creditors, your case is discharged in Chapter 7. In Chapter 7, your case is usually “closed” and thus finalized about two to six weeks after the issuance of discharge.

However, if you are in a Chapter 13 case which does repay some funds to some creditors, your proposed plan of Chapter 13 reorganization drafted by your attorney is usually approved by the Court about two to three months after your 341 Meeting of Creditors because there is such a local backlog of Chapter 13 cases. In Chapter 13, you start your monthly “plan payment” to the Chapter 13 Bankruptcy Trustee about 30 days after the filing of the case, and you make payments for 36 or 60 months. How long you must pay in a Chapter 13 plan (36 months vs. 60 months) and how much debt you must repay in Chapter 13 (1.0% vs. 99.9%) are complex topics best discussed with your attorney or his or her staff, because the two items (length of plan and debt repayment) are very complex calculations based upon how much you have been earning in the six months leading up to your bankruptcy filing.