How Current Bankruptcy Works
Understand the bankruptcy process before filing bankruptcy forms individually or with the help of an attorney.
The Debtor Files
To begin the bankruptcy process, a debtor with an unbearable debt load files a petition for bankruptcy protection in federal court. While this process is usually completed with the assistance of an attorney, an individual may complete the paperwork and file the bankruptcy petition himself. Once the petition is filed, the court will issue an immediate injunction stopping all collection activity until a formal meeting of creditors can be held.
A Repayment Plan is Established
At some point after the initial petition is filed--usually within 14 days--the court establishes a meeting of creditors in which the debtor and all parties owed money come together in the courtroom. Depending on the particular creditors and the amount owed, some or all of the creditors will appear; some may voice opposition to the debtor's filing. The debtor must pass a means test in which the court determines if the debtor is able to repay the debts in full. If the debtor is able, the petition is dismissed and the debtor must work with the creditors to establish a repayment plan. If the court determines the debtor is unable to repay the obligations, the bankruptcy case moves forward.
Repayment Takes Place and the Case is Discharged
After the meeting of creditors takes place, the court establishes a repayment plan in which the debtor repays some portion of the outstanding obligations as established by the courts. In a Chapter 7 bankruptcy case, the court may force liquidation of the debtor's nonessential assets, disbursing the generated funds to the creditors as repayment. In a Chapter 13 case, the debtor is generally able to keep his possessions but may pay a fixed amount to the court trustee via wage garnishment for a period of 3 to 5 years. Once the repossession and liquidation or repayment plan has been completed, the court issues a bankruptcy discharge, and the debts are wiped from the debtor's credit file. The bankruptcy record will remain on the debtor's file, however, for 7 years.