In The Bankruptcy Process: Stage 2 – The Determination, we discussed how to find a good lawyer and how he/she would make the determination as to whether you are eligible to even file.
At this stage, nothing has gone to the court so it’s not even “official” that you’re in bankruptcy. Since your first meeting with the attorney, a few things may have happened: (1) you had to collect the list of documentation needed, and (2) you saved the fee to pay your bankruptcy attorney.
Reviewing the Documentation
During this meeting, a few things will happen.
- Your income will be verified – whether that’s paycheck stubs, disability checks, etc.
- The attorney pulls your credit report.
- You will have a copy of all your bills to make sure that anything not on your credit report is identified. This includes medical bills of any type or any proof of money owed to anyone – including family, friends, and/or relatives. Important Note: If you owe a family, friends, or relative money, do not pay them back during this time. When you’re in front of the judge, you will swear to tell the truth and if you lie about this, you risk having your entire case deemed ineligible.
- Statements for savings account, 401k, investments, etc.
- Titles to anything you own such as houses, cars, etc.
- Paperwork for any real estate holdings such as land, commercial businesses, etc.
- Information regarding in heritance forthcoming, loans owed to you, money owed to you for any reason for which you have documentation.
If you have anything of value considered an asset to the court (this would exclude your personal belongings), you need to disclose this now.
Note: The focus here is on Chapter 7 bankruptcy that eliminates all your debt in one fell swoop. Chapter 13 is a debt repayment program and that is outside the scope of this document – although there are similarities.
The Emotion Factor
Things have already been tough as you made your financial journey to this point – whether it’s been a few months or a few years. This process of reviewing everything is going to be rather unsettling as you realize a few things, both positive and negative:
- How much you really owe. You’ll probably be overwhelmed.
- Realization that your life after bankruptcy will be free of this debt, but that you will have to live off what you make – not what you can borrow.
- What you may have to give up such as that second home, an extra car, vacation time-share, etc.
Put this in perspective. While this is hard right now, the outcome at the end of the tunnel is the relief of a huge burden off your shoulders and a chance at a new life.
The Learning Requirement
The court requires that you attend a debt management course. Your attorney will provide you a list of places you can go in person or the web sites available on line. You will have to pay a fee for this and you and your spouse (if applicable) will both be required to show proof of completion.
Take the learning very seriously. Remember: you got into debt because of money mismanagement. Without having access to credit going forward, you will have to learn to live within your means. This course shows you how to do that. Once you have your completion paperwork, provide it to your attorney.
Up to this point, the process may have taken a few days or even a few months. Your attorney will have submitted your case to the court and you should have an approval to proceed. That approval means that you are “officially” in bankruptcy. As of right now, you are paying nothing to anyone except your house mortgage and any car payments for the vehicle you are keeping. Avoid the inclination to go on a spending frenzy. Until the case is final – which will be a few months – you need to adjust your finances and work on sticking to your budget. It’s not over until the judge says it’s over.
Next, we’ll talk about your day in court in The Bankruptcy Process: Stage 4 – The Deliberation.