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Bankruptcy Filing: be Aware of Legal Nuances
By
Lesley Lyon
Anyone person
who is a bankrupt is usually unaware of the
nuances of legal process involving
bankruptcy. Before filing for bankruptcy,
the person must collect all the personal
financial information that include a list of
all secured and unsecured debts, tax returns
for the last 2 years and deeds to any real
estate and any other loan documents.
The first and foremost step to be taken by a
bankrupt person is to file for bankruptcy
through the bankruptcy court, which is a
legal process. The next step is to complete
the bankruptcy forms called the “schedules”
wherein the debtor should describe his or
her current financial status and recent
financial transactions. The debtor has to
choose between chapter 7 and 13. For filing
chapter 13 bankruptcy, a proposed repayment
plan must be submitted with the petition.
Filing bankruptcy can be done by talking to
people who have technical information about
bankruptcy or better still to visit a
bankruptcy lawyer who can guide through the
complicated procedure of filing for
bankruptcy. The lawyer should be provided
with all the personal information to put
together and file the voluntary petition.
Once this process is over, the bankruptcy
court assigns a trustee to see to it that
all the informations are collected and that
they are accurate. The next step is to
notify the creditors that the debtor is
filing for bankruptcy so that they stop all
actions they might be taking up against the
debtor to get the payments. After this, the
next procedure is meeting the various
persons who are involved in the bankruptcy
case along with creditors and if possible,
their lawyers.
An automatic
stay goes into effect immediately upon
filing the petition with the bankruptcy
court which prevents the creditors from
making direct contact or staking a claim to
any of the debtor’s property from the date
of filing. Approximately, a month after
filing the bankruptcy petition, the trustee
will call the first meeting of creditors,
which is known as 341 meeting that requires
the presence of the debtor. It is an open
opportunity for creditors to question and
the debtor is required to respond in full
faith.
A creditor must file a proof of claim within
90 days after the first date set for the
meeting of the creditors. If there is an
excess asset after all the claims are
settled, the court may grant an extension of
time for filing of claims during the 90-day
period. Objections if any are resolved by a
negotiation between the debtor and the
counsel of the debtor and the creditor. A
judge will intervene, if necessary, when a
compromise cannot be reached. If there are
no hiccups, the debtor receives a notice
from the court that the bankruptcy is
discharged within 4 to 6 months.
Student loans guaranteed by the government
are not dischargeable, that is the student
continues to be liable for the payment even
if he files bankruptcy. The debtor’s goal is
to have as many debts discharged as
possible. The ten categories of debts
excluded from discharge are divided into 2
areas: debts that are not dischargeable due
to the wrongful conduct of the debtor and
debts that are dischargeable due to public
policy.
Conclusion
Are you one
of the many that suffer from insurmountable
debt and wonder if bankruptcy is an option?
Give us a call at (203) 924-6700 or
contact us.
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