When you and your attorney file your bankruptcy papers, it is not automatically assumed that everything listed is the exact truth. Attorney’s generally will not file any claims that they know are inaccurate, but they are relying on you to provide all of the appropriate information.

In most bankruptcy cases, the attorney will go through the paperwork to determine if any claims being made are inaccurate.  Once the case is filed, the trustee will go over all the information supplied looking for inaccuracies or reasons to believe fraud may be involved.  At this point, the trustee is acting almost like an auditor, or an advocate for the creditors.  In addition to the trustee’s inspection, your filing can be formally audited.  The audit involves the verification of the income, expenses, and assets reported on the bankruptcy schedules and statements.

Bankruptcy attorneys usually work with a trustee on many different cases and know how to file your paperwork to meet a specific trustee’s concerns. Any issues with how a trustee handles a case should be left up to the attorney to deal with. This is yet another reason to hire a bankruptcy attorney.

The trustee is appointed by an officer of the Department of Justice called the United States Trustee. The trustee will participate in all creditor meetings and has the power to discharge a creditor’s claims if evidence of fraud or ineligibility is found with the creditor. In this case, they are acting as an advocate for you. The trustee will also make sure that you are meeting any requirements you may have for budgeting and money management.

Trustees working with Chapter 7 filings generally serve a one-year term.  The trustee’s role in a Chapter 7 bankruptcy include liquidating any non-exempt assets in a manner that maximizes the return to the unsecured creditors.  The trustee does this by selling your property, then distributing the money to the creditors.  The trustee also has the power to consider if there are preferences or fraudulent transfers that can be recovered from which creditors can be paid.  Trustees working with Chapter 7 filings earn a fixed amount for each case (at the time of this writing, $60 / case).

Trustees working with Chapter 13 filings may be standing trustees serving a geographic area or a court region.  In a Chapter 13 bankruptcy, the trustee’s job is more administrative as there are no assets to liquidate.  They will make sure the balances claimed are true and they have approval power over the repayment plan.  The trustee will accept payments from you and distribute them to the creditors according to the repayment plan.  Trustees working with Chapter 13 filings earn a percentage of the money collected during the case.

In the end, it’s important remember that even thought the trustee wants to insure that everyone is treated fairly, this necessarily means recovering as much money as possible for the creditors.

If you are filing Chapter 7 bankruptcy, you need to be current on you mortgage payments and have very little equity in your home.  Since the mortgage company holds the title to your home and you have very little equity, the courts cannot make a sale to pay down your debts. The key in Chapter 7 bankruptcy is to be up to date on your mortgage and tax payments before all other debts.  If you owe back payments on the mortgage, you may lose the home if you cannot work out an agreement  with the mortgage company.

If you are filing Chapter 13 bankruptcy, the same rules apply -  you must be up to date with your mortgage and taxes.  You will also need enough monthly income to pay your monthly expenses and your debt payment to the trustee.  Remember, with Chapter 13, you cannot be late on your agreed upon payments to the trustee or the agreement can be voided.

In either type of personal bankruptcy, saving your home is not difficult with a little preparation.  Make sure all of your mortgage and tax payments are up to date and by all means, talk to a bankruptcy attorney.

In Chapter 13 bankruptcy, you do not have to surrender your assets to the trustee like you do in Chapter 7 bankruptcy.  The trustee will figure out how much you need to pay your monthly debts and living expenses.  Any remaining money from your monthly income will be used to pay down your debt.  This money is given to the trustee every month.  the trustee then distributes the money to the proper creditors.  It is very important that you make this payment every month on time.  Missing just one month can result in termination of the court agreement.

You will also be giving up one half of your income tax refund every year for three to five years.  The income tax money is applied to the unsecured debts that may not receive any money otherwise.

Your assets will be surrendered to the US Bankruptcy Court Trustee, who will sell them.  The proceeds from the sale will be distributed to the creditors starting with the secured debts, then the unsecured debts.  The trustee also receives a portion of the money as pay for doing the work.

Chapter 7 bankruptcy has become more difficult to file since 2005, when new bankruptcy laws were passed.  Now, if you have a monthly income and tangible assets, you may not be able to file for Chapter 7 bankruptcy.  If you have enough income to pay a monthly payment on your debt (in addition to your monthly living expenses), you may have to file Chapter 13 bankruptcy.  Your lawyer will advise you on what type of bankruptcy, if any, you qualify for.

You will have to surrender all of your assets, but there are ways to keep your home in a Chapter 7 bankruptcy.  Your mortgage payment must be up to date and you can only have a small amount of equity in the home.  You must also be able to make the monthly mortgage and tax payments.  This is an area where you definitely want to consult a bankruptcy lawyer.

When you file Chapter 7 bankruptcy, the trustee and creditors will sit down with you and determine if you should have your debts forgiven, or ‘discharged’.  Any debt that are not discharged will be your responsibility until you pay them.  The other, discharged debts will show on your credit report as discharged in bankruptcy for seven to ten years.

1. Price - This is listed first not because it’s the most important, but because it may be the most shocking.  It is not unusual for a bankruptcy lawyer to charge $2,500 and ask for half the money upfront.  I know, you’re thinking “if I could afford that, I wouldn’t go bankrupt”, but the truth is, going bankrupt is not cheap.  You want a lawyer with the knowledge and expertise to get the job done without any mistakes or last minute surprises - and that costs money.  You don’t want the cheapest lawyer you can find, because they’re probably cheap for a a reason.  You will also need money upfront for the filing fee and the credit counseling fees.
2. Location - You will need to meet with your lawyer possibly several times during the process.  Find someone convenient to you.
3. Time - Find a lawyer that has the time to dedicate to your case.  When you interview the lawyer is he taking time to listen to you?  Or is he rushing you out the door to get to the next client?   This may be a sign he doesn’t have the time to add you to his case load.
4. Comfort - Find someone you’re comfortable with.  You will be divulging all of your personal financial information to this person, and you will be spending some time with them.  Make sure this is someone who you are comfortable dealing with about such private issues.

In the end, selecting a bankruptcy attorney is much like selecting a good doctor or mechanic.  You want somebody you’re comfortable with, who has time for you, who’s convenient, and who charges a fair price.

The credit counseling agency will want to see all of your monthly income and expenses.  A good agency will work with your creditors to try to get your payments lowered to a manageable level.  The agency will then suggest a budget and payment plan for you.

Remember, you are required to go through credit counseling before filing for bankruptcy, but you are not required to use the repayment plan the agency may propose to you.  You may determine through credit counseling that bankruptcy is, indeed, your only reasonable course of action.

Once your bankruptcy case has ended, you will be required to go through another counseling session to learn about personal finance management.  This session is designed to keep you from getting into financial difficulties again.

• bank statements for all bank accounts
• pay stubs for all income
• titles to vehicles
• documents pertaining to your 401k accounts
• documents/statements for all pension and IRS accounts
• documents/statements for all debts (credit card statements, etc.)
• tax returns for the past 3 years

If you own a home you will also need a declaration of insurance and a copy of the deed holder for the mortgage.  You will also be asked to complete a background sheet detailing any past judgments and garnishments.

It can also be helpful to furnish a copy of your credit report, since that contains much of the information you will need.  You can get a free copy of your credit report each year from AnnualCreditReport.com

Once the bankruptcy lawyer has all of your information, he should be able to tell you how much your monthly payment will be for a Chapter 13 bankruptcy, or if you qualify for a Chapter 7 bankruptcy.  Regardless of which bankruptcy you choose, you will need to participate in a credit counseling session.

Once the credit counseling session has been done, if you decide you still need to declare bankruptcy, the bankruptcy attorney will file the paperwork with the US Bankruptcy Court.

After the papers are filed, creditors can no longer attempt to collect debts from you.

Personal bankruptcy is designed to give you a fresh start by relieving most, but not all, of your debt.  Some debts, such as tax liabilities, fines, and some lawsuits, cannot be cleared through bankruptcy.  It is very important that you check each of your debts to make sure they can be cleared through a bankruptcy filing.

During the bankruptcy proceeding, you have to attempt to pay off as much debt as you can.  Most assets and cash on hand will be seized and used to pay off your debts.   There are some assets, such as clothing, household furniture, and your automobile, which are exempt and cannot be seized.  Laws regarding this vary from state to state, so check with your bankruptcy attorney to be sure.

Once you start you bankruptcy proceedings, creditors can no longer attempt to collect debts from you.

Bankruptcy is filed in a US Bankruptcy Court.  There are six types of bankruptcy, but only a few of these apply to individuals.  Chapter 7 and Chapter 13 bankruptcies are the most common types filed by individuals.

Chapter 7 bankruptcy, also known as a ’straight bankruptcy’ or a ‘liquidation’, involves selling some of your property in order to pay down your debt.  When you do this, the Chapter 7 bankruptcy will erase most, if not all, of your unsecured debts.

Chapter 13 bankruptcy is known as a ‘reorganization’ and is the most common type of consumer bankruptcy.  If you file Chapter 13, you will typically repay your debts over a period of three to five years under the protection of the US Bankruptcy Court.

Before either of these options can be undertaken, you must first undergo credit counseling, budgeting, and debt management counseling with an approved counseling agency.