Monday, June 24, 2013

How to File Bankruptcy?

      The easiest answer is to call a local attorney, explain your situation, and then see what she advises. However, the point of this post is to explain what you need to do in order to file a bankruptcy petition.

1)      Collect and compile all of your debts.  Pull your credit report, for free with no strings at  Gather all bills, statements, and collection letters from your creditors to make sure you have all account numbers, balances, recent payments made, their names and addresses.  All of this information, except for the account numbers, must be included in your bankruptcy petition. So get all of this organized.
2)      File your taxes.  Bankruptcy law does not allow you to file a bankruptcy unless you have filed your taxes.  It does not matter if today is February 3 and you have until April 15.  Bankruptcy law will not grant you a discharge unless you have filed your taxes.

3)      Collect and organize your previous 6 months of paystubs or other proof of income.  The Bankruptcy court requires that you disclosure all income received and its source from the previous six months prior to filing the case.  The court also requires that the previous 2 months of income statements be submitted to the US Trustee’s office for review. 

4)      Organize and know all of your assets.  In your petition, you will have to list everything you own.  The underlying, extremely simplified premise behind bankruptcy is: that when you file a trustee is appointed to your case who has the ability to take and sell everything you own, use that money to pay your debts, and whatever debts still remain are discharged, or “wiped away.”  Well, having everything you own being sold does not really help with a “fresh start,” therefore, federal and state law allow you to keep certain items to a certain amount.  That is why you need to tell the court everything you own, so the trustee can calculate the value of your assets and determine which ones are exempt and which ones are not exempt from seizure. 

5)      Property Identification.  The Bankruptcy Court requires government photo-id and government issued social security number.  You cannot use a tax return, because you send that to the government. You need your SSN card, Medicare Card, W-2, or Tax Transcript because those are from the government.

       Filing bankruptcy is a completed process and we strongly urge that you hire an attorney to represent you in a bankruptcy case instead of trying this on your own, but having the above things taken care of will significantly help with a smooth process. 



Tuesday, June 11, 2013

What happens to my Chapter 13 Bankruptcy Payments if my case is dismissed?

       The answer to the above question used to depend on how far along a person was in their bankruptcy plan.  The law was well settled that if a case was dismissed prior to the Court issuing an order of a debtor's plan, then the plan payments held by the trustee would go back to the debtor subject to only administration costs.

       Prior to just a couple of weeks ago, here in Middle Tennessee, if a case was dismissed after the plan had been confirmed any funds held by the trustee at that time were sent to the creditors in accordance with the plan since those payments were received by the Trustee when the case, and therefore the plan, was still alive. However, that was the custom.  The Middle Tennessee Bankruptcy Court just recently issued an opinion stating that any funds being held by the trustee when the case is dismissed will go back to the debtor, subject to any objections after parties have been given notice to file applications for that money. 

       Now, any funds received by the Trustee after the case was dismissed, because funds were in the mail or sent prior to an employer receiving notice of the dismissal, are sent back to the debtor.  That stills holds true.  The change in the disbursement of funds was limited only to funds received prior to dismissal, but not yet disbursed.  Good news for debtors, bad for creditors.