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With your bankruptcy attorney in tow
and essential documents in hand, it is now time to file
for bankruptcy, which means filling out a substantial
amount of paperwork.
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| Bankruptcy timeline |
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"There is a petition, schedules showing
all assets and liabilities, a statement of income and
expenses, a statement of affairs -- which attempts to
elicit more information about the debtor's financial
affairs -- and in a Chapter 7, a means-test calculation,
a statement of intent concerning secured debt and various
disclosures that the debtor is required to have,"
says Marc Stern, co-chair of the Bankruptcy Committee
of General Practice solo division of the American Bar
Association.
"A Chapter 13 filing has the same
materials, minus the statement of intent and the means
test. Instead, it has a Chapter 13 plan."
The "Chapter 13 plan" is a repayment
plan that can extend from three to five years. The plan
establishes a set amount that must be given to the trustee
appointed to the case either biweekly or monthly. Also,
the Chapter 13 repayment plan must be filed at the time
that the bankruptcy petition is filed or within 15 days
of that.
Chapter 13 bankruptcies are for debtors
with regular income who have unsecured debts less than
$307,675 and secured debts less than $922,975. These
numbers are subject to change based on the Consumer
Price Index. If the consumer owes more than those amounts,
he or she has the option to file a different bankruptcy
chapter depending on their debts and income. Consult
an attorney to find out.
If employed, the debtor must provide to
the court evidence of 60 days of income from their employer
-- for example, check stubs.
Once the petition is filed, collectors
can no longer take action against the debtor or the
debtors' property, creating an "automatic stay."
This stay can only be for a short period of time, but
will vary. A Chapter 13 bankruptcy also has a "co-debtor
stay." This can stop creditors from trying to collect
from someone else who might have some responsibility
for the debt, for instance, the co-signer on a loan.
Rebuilding your
credit
According to the Mortgage Bankers Association's Home
Loan Learning Center, it is possible to start rebuilding
your credit even while you're filing bankruptcy. The
center suggests keeping one credit card account open
when you file.
Kevin Chern, president of StartFreshToday
Inc., a research resource for bankruptcy lawyers, explains
how this can be done:
"If you have no outstanding balance
on an account, you are not required to list the account
in your bankruptcy filing and the creditor won't be
notified directly of your bankruptcy. Sometimes, a lender
will allow a zero-balance account to remain open. Even
if you have a small balance that you pay each month,
some lenders will allow you to keep the account if you
keep it current.
"Obviously, you should consult with
your attorney as to whether you can afford to maintain
the debt payment. Also, if the creditor wants you to
sign a reaffirmation agreement, under the new law, your
attorney also has to agree that maintaining the debt
is not an undue hardship on you."
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