In 2005 the United States Congress re-wrote the Bankruptcy Codes to address what were deemed abusive practices by individual filers. However, what Congress failed to acknowledge to the public was that the large banks and credit card companies were the major contributors in writing these new codes to prevent consumers from discharging credit card debts and other consumer loans. The new codes have instituted new procedures and rules that limits how a consumer can use the code to relieve themselves of their debt. Although the code has been effective for nearly six years now, most consumers do not understand, and cannot comprehend, the procedures of filing a bankruptcy petition.
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Hopefully this article can help to clear the misconceptions and fear of filing a bankruptcy petition, particularly a Chapter 7 bankruptcy petition, without an attorney, so that the individual can have a financial fresh start to their life.
Generally, the bankruptcy is started with the debtor (individual) filing a petition with the bankruptcy court within the district in which they live, know as a voluntary petition. However, the amendments makes an individual debtor ineligible under any chapters unless, within 180 days of filing the petition, the debtor receives credit counseling from a "nonprofit budget and credit counseling agency" approved by the United States Trustee. Generally this can be done over the internet or telephone in as little as a hour, depending on the program chosen by the debtor. Once this counseling is completed the agency will produce a certificate to be submitted, with the petition, to the bankruptcy court. Additionally, the 2005 amendments require a "means" or income test to determine the eligibility of the debtor for filing a chapter 7 bankruptcy. This test is set by the income of the particular state in which the debtor lives. The bankruptcy court website has the information needed to determine the income-to-debt requirements to determine eligibility.
In order to ensure that the debtor includes all personal debts in the bankruptcy, the debtor will have to obtain their credit report prior to filing the petition. The credit report must be within 30 days of filing the bankruptcy petition. Additionally, the credit report will be submitted with the petition to the court. The debtor should also gather all the bills and creditors' information prior to preparing the forms, as this information will be needed for filing the bankruptcy petition. A good questionnaire can be found on the internet that will detail what information is needed for filing the petition.
Once the debtor has prepared the necessary forms for filing, the next step would be to file them within the local federal bankruptcy court. The cost of the bankruptcy filing fee is set by the court, however, this fee can be paid in installments or waived all together with a request by the debtor to the bankruptcy court. The debtor who prepares the petition themselves should move the court to waive the filing fee as a practical matter.
Once the petition has been accepted by the court, the debtor must again complete a budget and credit counseling program before the court will order a discharge in the case. Prior to the discharge the debtor will be required to attend a meeting of the creditors before the bankruptcy trustee. At this meeting the debtor will be asked questions regarding the petition, finances, and creditors. Once the bankruptcy trustee is satisfied with the debtors petition and answers, the debtor will then wait the statutory 60 days for any responses from the list of creditors. If there are no objections by the creditors, the bankruptcy court will then issue an order discharging the debtor's debt.
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