Bankruptcy Is More Difficult
It’s a lot harder to file for bankruptcy now than it was prior to 2005. That was the year the federal government passed sweeping changes and reforms to the then existing bankruptcy laws. Since then, there are pre-requisites to filing as well as financial documentation that must be submitted contemporaneously with a bankruptcy filing. These requirements make the process more difficult on a debtor seeking relief. However, with the guidance and support of a knowledgeable bankruptcy lawyer or bankruptcy law firm, the degree of difficulty can be lessened.
The Initial Consultation
Every bankruptcy case still starts with an initial consultation with a lawyer. This is where the prospective client sits down with an attorney to discuss his finances. The attorney will inquire as to the type of debt, extent of the debt, income, expenses, assets and several other items of importance in determining whether or not that client can be helped. If the prospective client has very little in the way of assets and a sizable amount of dischargeable debts, then the attorney will likely recommend a chapter 7 fresh start bankruptcy case. If on the other hand, the debtor has significant nonexempt property and has the ability to repay either all or a portion of the debt to creditors over a 3 to 5 year period, then the attorney will likely recommend a chapter 13 reorganization bankruptcy case. The information that the client provides as well as the inquiry that the attorney engages in are the two most critical takeaways from the initial consultation.
Attorney’s Advice
Let’s assume in the above example that the debtor does not have significant assets and is looking to discharge plenty of unsecured debt. In that situation, the attorney is going to advise the debtor to submit to a credit counseling session. This session is one of the prerequisites mentioned above which must be completed prior to the filing of a chapter 7 bankruptcy case. The credit counseling session should last anywhere from one hour to one and a half hours and it can be done online, in person or over the telephone. The average cost for credit counseling around the country is $15. There are some that are less expensive and there are plenty that are more expensive. However, if you seek out a credit counseling company which is approved by the executive office of the United States trustee, you should be able to find several providers in the $15 total cost range.
Debtor Requirements
In addition to credit counseling completion, the debtor must provide his most recent two months’ worth of pay advices prior to a case being filed. This is required under the bankruptcy code and most chapter 7 panel trustees are going to want to review those pay advices prior to seven days before the actual meeting of creditors. If the debtor does not have pay advices, he can provide an affidavit or statement indicating that he does not receive pay advices. Further, if the debtor is on Social Security, disability, or unemployment, the debtor could provide a letter to that effect. The important point with pay advices is that the debtor must now prove that the income stated on the bankruptcy petition is true and accurate.
Submitting Tax Returns
Lastly, a debtor in a chapter 7 bankruptcy case must provide the most recent federal tax return filing. This has to be submitted to the chapter 7 panel trustee prior to seven days before the hearing date. Several trustees are beginning to ask for two years’ worth of federal tax returns. For that reason, my office and many other offices around the country are beginning to request that the debtor provide two years. In many cases, a debtor will struggle to gather the necessary tax returns. For this reason, the Internal Revenue Service has set up a telephone line whereby a debtor can request the most recent four years of federal returns if necessary. For chapter 7, one or two years is all that is required. For chapter 13, the last four years are required.
So as I have illustrated, it is more difficult to file a bankruptcy case now as opposed to 10 years ago. However, if you are someone who is struggling financially, you will have the ability to complete the prerequisites to file for bankruptcy. If you have an experienced bankruptcy attorney providing you with the proper advice and guidance, the process can seem relatively painless. On the other hand, if you try to file on your own or with an attorney who lacks experience and expertise, you may find the process quite difficult. My best advice would be to associate yourself with a lawyer or law firm which handles bankruptcy on a daily basis. By hiring the right attorney, you can make it difficult situation seem relatively easy.
