Many people delay filing for bankruptcy because they do not know what it takes to file. Waiting can mean more weeks of having your salary garnished, it can mean using pension withdrawals or loans to pay debts and it can mean having their bank accounts taken by creditors. If they had acted sooner, the garnishment would have stopped, they would have kept their entire retirement benefits through the bankruptcy and their bank accounts would have been saved. So, what does it take to file for bankruptcy?
Once you have decided to file and have selected a lawyer to represent you, the timing of the filing is up to you. While we usually like to take at least a week to have everything ready, in an emergency we have been able to file papers within a few hours. Such emergencies usually involve the proposed sale at a foreclosure the next morning of the client’s home. Absent a crisis of that nature, a few days to a week to get everything ready is usually the best. However, you can always take longer to file.
The most important thing the lawyer needs to file your case is to know exactly who you owe money to. It is easiest if you have recent bills and collection letters from your creditors, but if these are not available, your lawyer can get credit reports for you. One warning though: the credit reports that you might get from freecreditreport.com, or similar websites, are not very useful for a bankruptcy filing, as they are giving you a condensed version of your reports and they leave out a lot of the information that is useful in preparing your papers. Either let your lawyer get your credit reports for you or go to www.annualcreditreport.com to get all three reports, and make sure you print them out because once you see your reports on line, you cannot go back and look at them again.
The other documents we need are your paychecks for the past six months, or as many of them as you can locate. If you are on unemployment, we can get a print-out of your unemployment receipts. If you are not working, we do not need either of these. We also need your last two tax returns if you have filed them.
The client must also take a credit counseling course. This is a requirement that Congress, at the urging of the credit card companies, put into the law, hoping that people would take the course and then enter into debt management plans and pay off their creditors a little bit each month. This never happened, as people who are in a position to consider bankruptcy cannot afford to pay off their debts, even at a little bit each month. But you still have to take the course. The course lasts about 90 minutes and can be taken on-line or by telephone, and while it can be quite boring, it is something clients have had no trouble completing. We will set it up for you and make it easy for you to complete.
Clients often ask why the entire fee has to be paid before we can file a case. The reason is that if it is not, and the case is filed with the client owing money to the attorney, this is a debt which is discharged in the bankruptcy. It can be seen as improper to collect discharged debts, and the attorney would be ethically bound to remind the client that the debt does not have to be paid, even though the debt is to him.
In my practice, most people first come in for a free consultation at which we discuss the bankruptcy system and advise them whether bankruptcy would be right for them and what they need to do. We often tell people not to file and help them find other means to solve their problems.
Although clients are welcome to begin their cases at that first meeting, many make a second appointment to come into the office and retain us. Once they retain us, we have them tell creditors that we are retained to file a bankruptcy case for them, and the creditors then stop calling them. Also, creditors will often delay any further attempts to collect, including holding off on filing suit. Retaining us will not stop wage garnishments or seizure of bank accounts. To do that, the case has to be actually filed. However, if lawsuits have not been filed, telling creditors we are filing your case will often give breathing room, especially if it will take some time to pay the fees.
Once we have all the documents we need, and the credit counseling is completed, the client can sign the papers. We then file them with the court electronically and you are immediately assigned a case number. Where there is a wage garnishment or a bank account is restrained we send papers showing the filing to the creditors lawyers immediately and the garnishment stops and the bank account is released.
About 4 to 5 weeks after the filing you have to make one short appearance in court and be interviewed by the case trustee, which is a lawyer who has been appointed to administer your case. You will get a specific time to appear, but you may not be called right away. Once you are called, the interview lasts about 5-10 minutes.
There is a second credit counseling course you have to take after the filing, which again can be done on-line or by telephone, and lasts another 90 minutes. We will set this one up for you as well.
After the appearance in court, you will receive your discharge about 60 days later and then your case will be closed.
Although all of this may seem complicated, rest assured that your lawyer will guide you through the process.
Allan Bloomfield practices bankruptcy law in Forest Hills, Queens. Contact Allan today for a free consultation.