A Chapter 7 bankruptcy case can take can take anywhere from 3 to 4 months if someone moves very quickly. Allow me to explain. Chapter 7 involves the filing of a bankruptcy petition. The bankruptcy petition has to be prepared, signed by the client; the client must then take credit counseling and provide the most recent federal tax return and the most recent two months of paycheck stubs. If the client is able to do all of this relatively quickly, then we can file the case within a matter of a few days or a week. From that filing date, the statutory timeframe is approximately 110 days. So if somebody really wants to get the process going and they are really prepared, we can file quickly after meeting and we can have the case through the system probably in about 90 to 110 days.
In most cases, however, someone is not prepared to file immediately upon seeing me. The person wants to gather the information. The person wants to go on a payment plan. The person wants to think about it. And then of course, we need to prepare the documents. The person needs to review them; the person needs to get the documents back to us so it is a process. But if somebody really wanted to move quickly, if there was an emergency of some sort, then a case can be filed almost the same day, usually the following day; court 4 to 6 weeks after and then the final discharge about two months after the meeting of creditors.
So what I tell clients is that the process is about 3 to 4 months depending upon how fast you with the client want to move the process. Once again, some of things that hold up the filing are the inability to take the credit counseling. Credit counseling is a one hour session or so on the computer or over the phone where you meet with the counselor approved by the bankruptcy court and it must be done prior to the case being filed. There are some judges that say you can file it on the same day but it’s always best to have the credit counseling completed prior to the actual filing. The client also must provide the most recent federal tax return. Many clients don’t keep tax records or they’ve moved and they can’t locate them. And we have to request those from the IRS.
Lastly, the client must provide two months’ worth of paycheck stubs or other pay advices if they are not employed. Many clients do not keep their paycheck stubs. Thus, they have to go to their payroll department and order them or request them and then get those to us. And then most importantly, the client must review the documents that we prepare and sign them and return them to us. Once those items are done, the case technically can be filed.
You want to work out an arrangement with your attorney as to how much the case is going to cost and how much the attorney is going to need prior to filing. Some attorneys simply will not file a case until the attorney’s fees are paid in full. Other attorneys will do what’s called a post-petition retainer agreement where they demand a certain amount up front and they accept a certain amount after the case is filed. The risk with the post-petition retainer agreement to the attorney is that the client may or may not pay the rest of the fee. So each attorney determines whether or not he or she is going to do a post-petition retainer agreement or whether he or she is going to demand full payment upfront. It really depends upon the circumstances. If a client is currently being garnished at several hundred dollars per month and simply does not have the ability to pay, however, if the garnishment were to stop, the client would certainly have the ability to make a payment plan, then that would be a good candidate for a post-petition retainer agreement. If on the other hand, there is simply no urgency to file, no garnishments, no lawsuits, then it really doesn’t make sense for an attorney to file early because the attorney is then at risk of not being paid.
An attorney should be paid for the services provided under bankruptcy in the client should be more than willing to pay for those services since so much debt is being eliminated. Each attorney is different. Each case is different. I will look at each case and determine whether or not we need to file early or whether or not we can simply put the client on an extended payment plan and hold the creditors off.
