Bankruptcy is a legal proceeding in federal court in which a person with debts (called the debtor) can be freed or “discharged” from most of the debts. Below is a step by step guide to help you in the process of filing for bankruptcy. You should not skip any step as completion of each step is essential to a complete filing. However, even after following all of the steps, you should check with the bankruptcy court to make sure you have all the necessary documents as their requirements may change from time to time.
STEP 1: Decide if you want to file
If you do not have any assets (valuable property that is not exempt such as a second car, second house, newer electronics) you are judgment proof. This means that even if a creditor gets a judgment against you for the amount you owe, they have nothing they can take from you to satisfy that judgment. Therefore, you can just ignore the creditors and not pay. However, you still need to attend all court hearings and explain your financial situation. If you choose to do this you can send a stop annoying phone call letter to the collection agencies that should help reduce the number of harassing phone calls you receive. However, creditors can still call between 8:00am and 9:00pm but only to notify you they are seeking other remedies. This is not a good option for someone who is temporarily unemployed or will soon be inheriting any valuable asset, because once you start receiving pay or assets the creditor will then be able to enforce the judgment they have against you by garnishing your pay or taking your newly acquired assets. These debts will still be reported on your credit report for up to seven years. The fact that you filed for bankruptcy cannot remain on your credit report for more than ten years.
Additionally, you will want to consider how much of your debt is dischargeable. Credit card debt, medical bills, and business related expenses are generally dischargeable. However, student debts, taxes, and child support are generally not dischargeable. For a complete list see the Bankruptcy Packet page 2. If you only have secured debt, collateral backed by the loan that the creditor can reposes, then bankruptcy is not a good option. It would be better to try to negotiate with the creditor for a modified payment plan.
Also you cannot file bankruptcy if you have recently received a discharge of your debt. See Federal Bankruptcy Basics page 12 for details on how long you must wait after filing either a chapter 7 or 13 before you can file again.
STEP 2: Determine which chapter to file under
If you do decide to file for bankruptcy you must decide if you wish to file under chapter 7, 11, or 13. In Chapter 7 an appointed trustee liquidates any non-exempt assets you have to split between the creditors and then the debt is discharged. Chapter 7 is primarily for consumer debt and is subject to the property exemptions and secured creditors rights. To determine whether your car would be exempt property you should check the value on Kelly Blue Book. For a general overview of chapter 7 see page 14 of the federal bankruptcy guide. Chapter 11 is for commercial enterprises who wish to reorganize their business to repay their debt by reducing the debt or extending the time for repayment. You should not do a chapter 11 pro se. For a general overview of chapter 11 see page 29 of the Federal Bankruptcy Basics . Chapter 13 is used when you have regular income and you want to keep a valuable asset by continuing to make some payments through a court approved 3-5 year payment plan. This is a good option if you are facing foreclosure and have the ability to make payments. For a general overview of chpater 13 see page 22 of the federal bankruptcy guide. See page 6-7 of ULS bankruptcy basics for a comparison of the options.
STEP 3: Obtain all three of your credit reports
You need to request credit reports from Equifax, Experian and TransUnion. If you have not done this in the past year it will be free at www.annualcreditreport.com. If it asks for a credit card number you are not in the right place.
STEP 4: Determine which mandatory counseling courses are approved
You must complete an approved credit counseling course within 180 days before filing your petition. For a list of approved credit course providers, go to the Utah Bankruptcy Court website. The course will cost between $30 and $50 and can be done over the internet. Many of them offer fee waivers if you ask. You will need to file the certificate of completion with your bankruptcy petition.
STEP 5: Make a list of all of my property, income sources, debts, and monthly expenses
These lists will help you fill out the paperwork that you will submit to the Court. You should make this list for the household, which means you list all of your spouse’s assets and debts even if you are not filing jointly. See pages 9-10 for a worksheet to fill out.
STEP 6: Download and print Utah Legal Services’ bankruptcy packet of instructions
Utah Legal Services has created a Bankruptcy Basics Packet. We recommend you download and print this packet for important information about the bankruptcy process including how to fill out each required form. We will be referencing pages from that packet throughout this step by step guide.
STEP 7: Download and print the petition
The actual document you file with the Bankruptcy Court is called a Petition. You will need to download and print the forms at www.utb.uscourts.gov. You will click on forms, then current forms. The following forms are what you need to click on and print:
- The highlighted Packet of Official Forms
- Statement of Current Monthly Income and Means Test Calculation (there is one for ch. 7 and a different one for ch. 13)
- Checklist (one for ch.7 or different one for ch.13)
- Payment Advices Certification (for both ch.7 and ch.13)
- Statement of Intent (for ch. 7 only)
- Model Ch. 13 Plan (if filing ch. 13) You will need to create a payment plan using this model
In addition if you have any interest in an educational retirement account or a state tuition program you will need to provide a record of that account. You may also have to file a statement of any anticipated increase in income or expenditures you will have over the next 12 months.
STEP 8: Fill out the petition and all the associated forms printed in step 7
Using your credit report and your lists of assets and debts fill out the paperwork the best you can. There are specific detailed instructions on pages 12-17 of the packet. If you have questions regarding the vocabulary in the documents you can refer to the federal bankruptcy glossary. If you run into problems at this stage call the 801 374 6766 ext. 3446. Leave a message if you do not get through and a volunteer attorney will return your call within a week. Please state your intake number and what time is best to reach you. If you do not have an intake, please call 801 328 8891 or 800 662 4245 before calling the above number.
STEP 9: Identify any debts you wish to reaffirm (continue to pay)
Some creditors can still take your exempt assets if the debt is secured. This means that if you used the money borrowed to buy something on credit then the creditor can take that item to satisfy their debt. Some examples would be a car where the bank has the title, a mortgage on a house, or even a washer and dryer bought on a credit card. If you have any of these assets and you wish to keep them, the best option is to claim bankruptcy and then continue to pay the debt. However, some creditors may require you to sign a reaffirmation agreement. Essentially, by reaffirming the debt the creditor will work with you to modify your payment plan to get caught up with back payments and to be able to make the payments going forward. The creditor will want to make sure that you will be able to make the payments so you will have to show some source of income to make the payment once the other debt is discharged. Additionally, some creditors may require you to use their forms. If this happens you may wish to bring it to the clinic to get some advice before you sign it, as often these agreements are not favorable to the debtor and may not be worth the asset you are trying to keep. To reaffirm a debt you will need to download and print the reaffirmation documents at www.utb.uscourts.gov, click on unrepresented debtor. Print the following documents:
You may also consider HAMP (Home Affordable Modification Program) to help modify your mortgage loan so you can keep your home. You can find more information by calling 1 888 995 4673 or go online to www.MakingHomeAffordable.gov. This is a free service.
STEP 10: Determine if you need a fee waiver or payment plan
If you are filing a chapter 7 and are unable to pay the $299.00 filing fee you can apply for a fee waiver. The application is found at www.utb.uscourts.gov, under forms, current forms. Print the Application for Waiver of Chapter 7 Filing Fee. The Court will make this determination based on your income, so if you have the money to pay in installments fill out the installment application instead of the waiver because the court will not grant a waiver if you have the means to pay the fee. You also cannot get a fee waiver if you paid anyone to prepare your forms.
If you are filing a chapter 13, you may be able to apply to pay the fee in installments. The application is again at www.utb.uscourts.gov under forms, current forms. Print the Application to Pay Filling Fee in Installments. All installments must be paid within 120 days of filing the petition.
STEP 11: Create a mailing matrix
You will need to submit a list of creditors and their addresses so the Court can notify them that you have filed and that an automatic stay is in place. This list will be divided into two matrices, one for domestic support creditors and the other for all other creditors. Once you have filed your petition, you will need to amend your matrix to include the Trustee.
There is a sample format for this matrix at www.utb.uscourts.gov under forms, current forms on the right hand side called Format Guidelines for List of Creditors. Another alternative is to submit this matrix by email. The instructions are also at www.utb.uscourts.gov on the right near the bottom and is entitled Submit Mailing Matrix to the Court via E-mail. This link includes instructions on how to convert your document to text format to be automatically uploaded into the Court system.
STEP 12: File the documents with the bankruptcy court
Once you have all the above documents filled out, and your counseling course certificate, you can then either take them into the court or mail them. You will need to pay your filing fee at this time, if you are not seeking a fee waiver. While there are three bankruptcy courts in Utah you must file your paperwork in Salt Lake City, so if you do not live near Salt Lake you should plan on mailing your documents to the court. You can get directions to the courthouses at www.utb.uscourts.gov, under Court Information Tab, Court Location. See page 17-18 for more information.
Frank E. Moss US Courthouse
360 South Main Street Room #301
Salt Lake City, UT 84101
If you feel that you have not filled out the paperwork correctly or you have further questions Utah Legal Services may be able to answer your questions. If you would like to see if you qualify, . You may also take your paperwork to the Debtors Counseling Clinic held every fourth Thursday of each month at the Salt Lake City Public Library, 400 E. 210 S.
STEP 13: What happens next? The court will mail notice to your creditors and appoint a Trustee.
At this point the Court will mail notice to your creditors that an automatic stay is in place. An automatic stay means that the creditors are not allowed to contact you or attempt to collect debts while the bankruptcy is pending or during the 3-5 years you are in payment under a chapter 13. This means that they cannot call, garnish your wages, send you letters, start an eviction action, foreclose on your house or repossess property. If they do call, tell them that you have filed and that an automatic stay is in place. If they call after a couple of weeks (so you know that they have received the notice from the Court) then you have a cause of action against them under the Fair Debt Collection Practices Act (applies only to collection companies) or under the Utah Consumer Sales Practices Act (applies to all creditors).
The court will also appoint a trustee to evaluate your estate and determine whether there are any assets to liquidate in order to pay creditors. You will also be notified of any documents that you may be missing and will be given time to provide the requested information. You must comply with all of the trustee’s requests or your case could be dismissed.
STEP 14: What is the Creditor’s Meeting (applicable to both Chapter 7 and 13 cases) and also a Plan Confirmation Hearing in Chapter 13 Cases that I have to attend?
You will be required to attend a 341 Meeting of the Creditors. At this meeting the creditors will be allowed to ask you questions regarding your debt and assets to determine if they want to file anything in court to keep their debt from being discharged. You must send a copy of your most recent tax return to the Trustee at least a week before this meeting along with a declaration regarding the return. You will get a list of documents you must take with you to the meeting of creditors. Under a chapter 13 you will also have to take the first payment under your plan to the meeting of creditors. More information on pg 19-20 of the Basics to Know Packet.
In Ch. 13 you will also be required to attend a Plan Confirmation Hearing where the Court will determine if they are going to accept your 3-5 year payment plan. Your plan has to outline how you will pay secured debt as well as unsecured debt. Any back owed amount must be paid during the plan. You can get more information on page 25 of the Federal Bankruptcy Basics.
STEP 15: How do I get information regarding the Debtors Education Class I have to attend and where do I file the certification of completion?
Once your debt has been discharged you are required to complete a Debtors Education Class. You will need to file your certificate with form B23 located at www.utb.uscourts.gov , under forms, current forms entitled Debtor’s Certification of Completion of Instructional Course Concerning Financial Management. For a list of courses see http://www.justice.gov/ust/eo/bapcpa/ccde/de_approved.htm. This course usually costs between $45-$75 and is usually done online. Again, call a few to see if you can get a fee waiver.
STEP 16: When is my case over? The court will then grant discharge (ch.7) or payment plan (ch.13).
The creditors will have an opportunity to file objections to the discharge. Once the time period for any such objections has passedthe Trustee will file a report with the Court stating that the estate has been liquidated or that there were no assets to liquidate. Once the report is approved by the Court, your debt will be discharged or your payment plan will be accepted. A chapter 7 discharge usually takes about 60-90 days after filing the petition. Chapter 13 is discharged as soon as the payment plan is successfully completed. However, even if you complete the payment plan your long-term debts will not be discharged, such as a mortgage loan. Once the discharge is complete the court will mail notice to your creditors.
What is Bankruptcy?
ankruptcy is a legal proceeding in federal court in which a person with debts (called the debtor) can be freed or “discharged” from most of the debts. In a“Chapter 7” Bankruptcy, property of the debtor that is not exempt (protected by law) may be sold. The money from the sale of this property is divided among the people or companies to whom the debtor owes money (called the creditors). In a“Chapter 13” Bankruptcy, the debtor is given 3 to 5 years to pay off debts, sometimes at less than the previously agreed amounts, and the debtor’s property for the most part remains in the debtor’s possession.
Should I consider Bankruptcy?
The purpose of Bankruptcy is to give someone a fresh financial start. Bankruptcy will work best for people who will have an income that is adequate to support them and to pay their bills after Bankruptcy. It is usually advisable to wait until you have reached the point where your financial problems cannot be solved by personal efforts before filing. In other words, don't file if in six months your money problems will reappear. In most instances, debts you acquire after you file Bankruptcy cannot be added to the Bankruptcy. Before deciding to file, figure out what your expenses will be after you file and be sure to allow for some unexpected expenses. If you will not have enough money to cover your expenses after Bankruptcy, you may want to consider another option.
What is an “Automatic Stay” in a Bankruptcy?
As soon as a petition in Bankruptcy is filed, other legal actions against the creditor may be temporarily stopped, this is called a “stay of execution” or “automatic stay.” This includes foreclosures, debt collection actions, garnishments and repossessions as well as administrative actions and arbitration proceedings. A creditor can ask the Bankruptcy Court to lift the stay. If too many bankruptcies have been filed but not finished, a creditor may ask that the debtor be barred from filing for a time.
Can I get rid of all my debts through Bankruptcy?
Not always. A Bankruptcy generally will not rid you of debts for child support, alimony, most any debt from a divorce, fines, taxes, and many student loans, as well as, debts incurred by fraud or malicious injury. Under some circumstances a debtor can be denied discharge of all his debts as opposed to certain specific debts. If this happens the primary reason for filing Bankruptcy is defeated.
Are there credit service organizations that will help me avoid bankruptcy?
Yes. The Bankruptcy Court’s website links to the approved Credit Counseling Agencies:
Theses organizations provide services ranging from advice and counseling on budgeting and family money-management to working with creditors to extend payments on your account and temporarily suspend collection activities.
You are now required to complete a pre-filing counseling class from one of these agencies. The fee for a course is approximately $50.00. You may ask to have this cost waived. Because each organization has a different approach, it is worth the effort to shop around for the one that meets your needs.
Does Bankruptcy hurt my credit rating?
Bankruptcy does not always make it impossible to get credit, but it usually makes it much harder. The fact that you have filed Bankruptcy may stay on your credit rating for several years. On the other hand, foreclosures and garnishments hurt credit as well. If you think you need credit after Bankruptcy to buy a home, car or other large items, you may have to rebuild your credit history from the beginning. Sometimes credit is actually easier to obtain after Bankruptcy. But beware of getting deep into debt again after you file for Bankruptcy because in most Chapter 7 cases you cannot file Chapter 7 again for eight years. Chapter 13 Bankruptcy can be filed as soon as the last Bankruptcy is finished but you will not get a discharge of the debt if it has been two years from the last Chapter 13 Bankruptcy discharged or four years from the last Chapter 7 Bankruptcy discharged.
What property can I keep after Bankruptcy?
Under most circumstances, the following property is exempt from being taken by the Bankruptcy Court (more exemptions are listed in the Utah Code).
- The equity in your house or mobile home up to $20,000 if it is your primary personal residence (plus another $20,000 if the property is jointly owned) not to exceed $40,000;
- All wearing apparel, but not jewelry or furs;
- Certain furnishings and other household items;
- Professional books or tools needed for your trade up to $3,500;
- A motor vehicle with a value not exceeding $2,500.
In the case where exempt property has been pledged as collateral for a loan (called a secured debt), the secured creditor will get the property back unless the debt is reaffirmed. For example, if you were loaned money to purchase a mobile home, the agreement you sign usually gives the seller the right to take the item back if you miss payments. This is a secured debt.
How much does it cost to file for Bankruptcy?
The court's filing fee ranges from $274 to $299 depending on the type of Bankruptcy you are filing. Husband and wife should file jointly on the same Petition. Attorney fees depend on the complexity of the case and the attorney, although it is often the case that attorneys’ fees for Chapter 7 bankruptcies are lower than for Chapter 13. Self-help Bankruptcy forms are available (for a fee) from some websites and stationery stores. The Bankruptcy Court does provide forms on their website:. A Fee Waiver form is now available for Chapter 7 filings.
What is a Chapter 13 Bankruptcy?
The Chapter 13 Plan or "Wage Earner Plan" is another type of case you can file in Bankruptcy Court. Under a Chapter 13 plan, you make monthly payments through the Bankruptcy Court trustee to your creditors. The plan usually runs over a three to five-year period and in most circumstances you do not have to pay your unsecured creditors in full to be discharged from the debts. An unsecured creditor is a creditor to whom you have not given any particular collateral or security interest in a specific piece of property. A Chapter 13 plan will usually be approved by the Bankruptcy Judge if the Judge finds you filed the Plan in "good faith" and that you earn enough money each month to make your planned payments after paying your living expenses. Under Chapter 13, you can usually keep both exempt and nonexempt property, including your home, though there are restrictions on keeping unpaid luxury items.
Chapter 13 also has other benefits compared to Chapter 7. First, the automatic stay (see page 1) applies to co-debtors too, even if the co-debtor is not filing Bankruptcy. For instance, if you had a parent co-sign for the purchase of a car, filing Chapter 13 prevents the creditor from going after your parent while the Bankruptcy is open. Additionally, some debts that cannot be discharged in a Chapter 7 Bankruptcy can be discharged by Chapter 13. (But no Bankruptcy can discharge alimony and child support, student loans, damages awarded for DUI offenses, or criminal restitution.)
How does a Bankruptcy affect my divorce, and how does my divorce affect a Bankruptcy?
If the opposing party to your divorce action is ordered to pay debts by the divorce court, the opposing party may try to avoid actually making the debt payments by declaring Bankruptcy. If the opposing party has the debts discharged by a Bankruptcy court, the creditors can still collect on certain debts from you. The way in which the decree of divorce is written can reduce the likelihood of the Bankruptcy court discharging the debts.
Even if you do not label debt payments by an opposing party as anything other than debts, a Bankruptcy court could still decide not to discharge the debts. The court will make an independent evaluation for each debt in order to determine whether or not the debt should be discharged. The court will look at the reason the debt was incurred and what the intent of the divorce court was in ordering the opposing party to pay the debts. You can improve the likelihood that the Bankruptcy court will not discharge debts if you provide some guidance or "intent" by labeling the debt payments as either alimony or support in your divorce decree.
Labeling a debt as alimony shows a Bankruptcy court that the divorce court considered the debt payment as part of an overall alimony award. Alimony is not dischargeable in Bankruptcy. The Bankruptcy court will still make an independent assessment as to whether or not the debt payment really is alimony, but calling the debt payment alimony in the final order will make it more likely that the debt payment will be seen as alimony. However, before asking that the divorce court order debt payment to be alimony, you should consider any potential problems with having debt payments be alimony. First, the opposing party does not have to pay alimony if you cohabit, remarry or die. Thus, if you cohabited, remarry or die after your divorce, the obligation for the opposing party to pay the debts could cease. Second, the person receiving alimony pays income taxes on the alimony and the person paying does not have to. If the opposing party in your divorce pays a large number of debts, you may end up paying income taxes on the amount of money paid, without receiving any actual increase in your income that would help you pay those taxes.
Labeling a debt as child support shows a Bankruptcy court that the divorce court considered the debt payment as part of an overall child support award. Child support is not dischargeable in Bankruptcy. Therefore, you increase the likelihood that the Bankruptcy court will not allow the opposing party to discharge the debts.
However, child support usually only has to be paid until the youngest child living with you turns 18 (unless the court orders otherwise). If your youngest child will turn 18 prior to the time calculated for the opposing party to pay off the debts, the opposing party's obligation could cease.
How can I get help with Bankruptcy?
Many Bankruptcy attorneys advertise in the newspaper, the yellow pages of the telephone directory, and on the internet. Utah Legal Services cannot assist you with a Bankruptcy but may be able to answer questions. If you would like to see if you qualify, fill out our online application to start the process. If you are thinking of possibly filing Bankruptcy, start saving your pay stubs, bank statements, bills, and other notices from creditors. You will need this information to file.
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