Declaring Bankruptcy

A SCHWARTZ BANKRUPTCY LAW CENTER PUBLICATION

1

DECLARING
BANKRUPTCY
WHAT ANYONE
FILING FOR BANKRUPTCY
NEEDS TO KNOW

RICHARD A. SCHWARTZ
Declaring Bankruptcy 2

Richard A. Schwartz

About the Author

Richard A. Schwartz practices law in the Bankruptcy
and Debt Reorganization field for the past 28 years. Mr.
Schwartz concentrates his practice in Consumer and
Commercial Bankruptcy Law and related matters. Those
include debt negotiation, reorganization, workouts, and
debtor-creditor relations. Over the past 28 years, Mr.
Schwartz represents debtors,

creditors and trustees in bankruptcy cases in Kentucky, Indiana, Ohio, Tennessee and
California. Mr. Schwartz is a member of the American Bankruptcy Institute and the
National Association of Consumer Bankruptcy Attorneys. In 2004, Mr. Schwartz
served as Chairman of the Bankruptcy Section of the Louisville Bar Association.

S
A Publication of:

Schwartz
Bankruptcy
Law Center
 Testimonials
Clients of Schwartz
Bankruptcy Law Center

“We just want to say Thank You for everything. Our Trustee Meeting went fine
today. Your people that helped us before the meeting were very professional and
helpful. We are recommending Richard Schwartz to others.”

“I want you to know how much I appreciate all your help and your concern over
the past few months. I know I’ve been a pest at times but you always helped. It
was great having Mr. Schwartz at my meeting yesterday. He is such a great guy
and such a professional. It was clear that everyone in our 1:30 group felt that way
about him. I haven’t hesitated to recommend the firm to anyone who might be
needing help. Thanks again so much and I’m still looking for the one great Thank
You gift to send to the office.”

“I appreciate all your help with all of this. You, along with everyone in the
Schwartz office have been very helpful and have made this unfortunate process
very easy for me, thanks.”

“Just wanted to tell you I felt this bankruptcy process was much more painless
than I had anticipated, and I’m glad it’s behind me. My neighbor asked me who
represented me. He says he has clients asking all the time for a recommendation
for a bankruptcy attorney. So I am sending him your contact info, as I was very
pleased with your firm’s handling of this matter.”

“Thank you for all your help with our finances!! Our life is so much better.
Something that you do daily has made a difference in our lives, and we want
to thank you and your staff.”
 TABLE OF CONTENTS
Introduction
Bankruptcy Defined.........................5
The Trustee........................................6
Chapter 7 Bankruptcy ....................7
Chapter 13 Bankruptcy....................8
The Bankruptcy Process...................9
Step 1..........................................10
Step 2..........................................11
Step 3..........................................12
Step 4..........................................13
Step 5..........................................14
Step 6..........................................15
Conclusion .......................................16
Declaring Bankruptcy 5

Introduction
The Purpose of This eBook
Because you’re reading this guide,
either you or someone close to you is
in debt to such a degree that only
bankruptcy can salvage the
financial future. Bankruptcy used
to have a bad stigma. When families
declared bankruptcy decades ago,
citizens believed the whole process
served the irresponsible. Then, the
Bankruptcy Reform Act(s) changed all
of that. Instead of the bankruptcy
courts favoring the creditors,
the courts gave the debtor a better
position.
When the housing market crashed in 2008, bankruptcies rapidly increased by more
than 30 percent. Then, due to the rising amount of bankruptcy cases, the stigma wore
off. This is where I tell you that declaring bankruptcy is the best thing you can do
right now. However, never jump into any system that you don’t understand,
and that includes bankruptcy especially. The number of laws, guidelines, and
proceedings are too much for any one person to handle. This is where I come
in. Me and my firm specialize in litigating bankruptcy cases of all types.

We can help you. Don’t waste one more day. Contact us right now, and get the ball
rolling with your case. Most clients tell me that waiting to file was the worst decision
they had ever made. Without the first day, there can’t be a last. The following
guide will help you understand the Who, What, Where, and Why of
bankruptcy so that you are an informed debtor. If you go in clueless, the system
will chew you up and spit you out. We will not let that happen to you.
Declaring Bankruptcy 6

Bankruptcy Defined
What is Bankruptcy?

Bankruptcy is a process for consumers and businesses to be rid of old debts and
start anew. Depending on what type of bankruptcy you file, outcomes and final
liability differ from case to case. Now there are multiple types of
bankruptcies. However, Chapter 7 and Chapter 13 comprise nearly all cases
that we cover.
Declaring Bankruptcy 7

The Trustee
What Is a Bankruptcy Trustee?

When you declare bankruptcy, and file the paperwork, the courts assign a
“Trustee”, who is as impartial as possible, to administer your case. This
takes an enormous burden off of the court system, and is the reason why
you can even declare bankruptcy. Each state has a panel of Trustees, and
are appointed to cases on a rotating and random basis. Once the Trustee is
appointed, they see you through the rest of the process with the
attorneys and creditors. The powers of the Trustee in a Chapter 7
bankruptcy are different in a few ways from a Chapter 13 bankruptcy,
which I will elaborate on in the following sections.
Declaring Bankruptcy 8

Chapter 7 Bankruptcy
What Is a Chapter 7 Bankruptcy?

When you declare a Chapter 7 bankruptcy, your bankruptcy absolves

you of most debt. However, the court may require you to sell the property you
own to maximize the amount of money that the creditors receive. This is why
Chapter 7 is sometimes called the “liquidation bankruptcy.” It is like waving the
white flag in defeat and dealing with whatever the courts decide. Typical
Americans will file Chapter 7, but with the caveat of hoping
for mercy.
These are people who work, pay taxes, raise kids, and live law-abiding lives.
However, a sickness in the family, a tragedy, or even financial scams have left
them in debt. It may sound odd, but the very reason I became a bankruptcy
attorney was to fight for hard-working Americans to get them out of debt with a
fresh start. The fees you may pay for an attorney or an accountant will usually
come back to you in the end in one way or another. A competent advisor can
save you both time and money no matter what your situation or circumstances.
Declaring Bankruptcy 9

Chapter 13 Bankruptcy
What is A Chapter 13 Bankruptcy?

Other types of debts that might be non-dischargeable under Chapter 7 bankruptcy. Filings
may be discharged under Chapter 13 provided certain criteria are met. Competent legal advice is
necessary to decide on issues such as this. A Trustee is appointed to Chapter 13 cases. Once your
plan is approved, the Trustee will collect the payments you agreed to make under the plan and will
distribute the funds to the creditors. Overall, the Trustee will make sure you live up to the terms of
your repayment plan.
Your debts are not discharged under Chapter 13 until you have made the payments
required by the reorganization plan. The exception to this is the hardship discharge. A hardship
discharge may be granted provided the creditors have received the same amount that they would
have gotten under a Chapter 7 filing. If you are employed with a stable base salary—that is, a set
amount you can count on each payday rather than a salary based on commission that can fluctuate
from month to month—and you meet the other criteria regarding your debts, Chapter 13 may be a
viable option for you.
Chapter 13 is for regular wage earners with valuable non-exempt property that becomes a
part of the bankruptcy estate in a Chapter 7 case and sold by the Trustee to pay creditors. That
property can be retained in a Chapter 13 filing. This type of bankruptcy also provides relief for
those who are dangerously behind on secured debts such as mortgages and auto loans.
A repayment plan allows you to catch up and save assets from foreclosure and repossession.
With the help of an attorney, you devise a debt-reduction and repayment plan that enables you to
become solvent over the next few years. Besides, even though filing a bankruptcy is reported to the
various credit bureaus, if you honor your repayment plan and make regular payments to your
creditors, those payments are reflected on your credit report. This demonstrates your stability and
will improve your credit rating.
Declaring Bankruptcy 10

The Bankruptcy Process

What to Expect With Your Case

Regardless of the type of bankruptcy deemed right for you, you have forms
to complete with lots of questions to answer. All the information gathered during
this beginning process is used to prepare the bankruptcy petition filed with the
court. It is also used to determine needed steps you must take before the petition is
prepared and filed. This is where you begin to formulate the plan that takes you
through the process with a minimum of effort. This is the plan that enables you
and your attorney to minimize the effects of the bankruptcy on your life and
lifestyle. Now, I could sure list every facet of a bankruptcy case, but that isn't
pertinent to your situation yet. So, instead of doing that, I will simplify the basic 6
steps for Chapter 7 and Chapter 13 bankruptcy cases to give you an overview of how
bankruptcies operate.
Declaring Bankruptcy 11

Step 1
Retain a Qualified Bankruptcy Attorney

Meeting with a bankruptcy attorney probably doesn’t rank high on your

bucket list. However, if you are struggling financially, it only makes sense to
determine if bankruptcy is right for you. Prepare to consult with Schwartz
Bankruptcy Law Center by getting your financial information in order. In the back
of this book, there is a 5-page worksheet you can fill out right now. Then, print and
bring it to our office so we can consult with you.
Declaring Bankruptcy 12

Step 2
Credit Counseling Before You File
As part of your mandatory credit counseling for bankruptcy claims, the
credit-counseling agency must provide the following services to you before you
file for bankruptcy: An evaluation of your financial situation. This includes your
current income, debts, creditors, and a discussion of alternatives to bankruptcy. As
you may know, you may be eligible for other products and services, such as a
debt consolidation loan, a Debt Management Plan, or a Debt Settlement Plan.

It depends on your individual

financial situation, and you can
decide which option – whether
bankruptcy or not – is best for
you. If you have not already
reviewed your options other
than bankruptcy, consider
visiting Care One’s community
forums to talk to consumers like
you who have faced similar
financial challenges.

A personal budget plan is a good idea for anyone, especially if you have had trouble
paying your bills and keeping track of your income versus expenses. A good budget
plan can also help you avoid future debt problems and better manage your money
going forward. While credit counseling for bankruptcy filing does come with a small fee
– usually around $50, depending on your state, the types of services provided, and how
they deliver counseling. The agencies approved by the government must provide free
services for those who cannot afford the fee. Talk to the agency prior to your credit
counseling for bankruptcy session if you want to request a waiver of the fee.
Declaring Bankruptcy 13

Step 3
Filing Your Bankruptcy Petition

When filing for bankruptcy, you will be required to complete a set of

documents, collectively referred to as the Bankruptcy Petition. The Bankruptcy
Petition includes a cover sheet (Voluntary Petition), Bankruptcy Schedules A
through J. That is where you will itemize your assets, creditors, your income,
and your expenses. There is a Statement of Intention (Chapter 7 or 13),
regarding your secured debts and leases. You also get a statement of financial
affairs, which details your financial situation for the past few years. Finally, there
is a means test form, which helps you determine whether you qualify.
Declaring Bankruptcy 14

Step 4
Credit Counseling After Bankruptcy Filing

In addition to mandatory credit counseling before bankruptcy, you must also

complete a debtor education course by an approved counselor to have your debts
discharged. This session will include information about budgeting, managing money,
using credit wisely, and make you aware of other resources available to help you
manage money and credit in the future. As with the pre-filing credit counseling
session, the post-filing session can be done in person, over the phone, or online, but
where the pre-filing session lasts for approximately one hour, the post-filing session
will generally last for up to two hours. Fees for the post-filing debtor education will
range from $50 to $100, unless you ask for and obtain a waiver from the counselor
prior to your session. You will receive a certificate as proof that you have completed
the post-filing debtor education. This is a separate certificate to the certificate you
received prior to filing for bankruptcy.
Declaring Bankruptcy 15

Step 5
Meet With Trustee & Creditors

After you file for bankruptcy, you are required to attend a “meeting of
creditors.” This is a meeting with the bankruptcy trustee and perhaps some of your
creditors. It is not a court hearing, and it usually lasts only a few minutes. Every
bankruptcy case has a meeting of creditors (also called 341 hearings or 341 meetings
after the section of the bankruptcy code that governs them.). When your creditors’
meeting takes place depends on the Chapter under which you file bankruptcy. In
Chapter 7 cases, the first meeting is 21 to 40 days after you file bankruptcy. In Chapter
13 cases, the first meeting may be set a little later – between 21 and 50 days after you
file bankruptcy. You must attend. If you don’t attend the meeting for creditors, the
court could dismiss your bankruptcy case.
Declaring Bankruptcy 16

Step 6
Debts Discharged

Obviously, this step is the most satisfying one. Most of our clients say they
feel a weight lifted off them once the court discharged all their debt. A
bankruptcy discharge eliminates the debts listed in your bankruptcy petition. The
debts will no longer be legally enforceable by your creditors after the bankruptcy
discharge. However, any debts you did not include as part of your bankruptcy
case will not benefit from the bankruptcy discharge. In a Chapter 7 bankruptcy,
your debts discharge at the end of the 60-day period. For a Chapter 13
bankruptcy, you will receive a bankruptcy discharge at the completion of your
repayment plan.
Declaring Bankruptcy 17

Conclusion
Life After Bankruptcy
Despite the stigma created by banks and lenders, you can
still rebuild your credit substantially In fact; by the time most
people decide to file for bankruptcy, their credit score is already
devastated. After bankruptcy, your debt-to-income ratio improves
and you have less outstanding debt. You may actually look like a
better risk because creditors know that you will be unable to
discharge debt through bankruptcy again for up to 8 years. In
fact, many consumers who declare bankruptcy start receiving credit
card offers in 30 to 90 days after discharge. After declaring
bankruptcy, be sure to check your credit report every 30 days,
and dispute unresolved claims listed in your bankruptcy. Call us
immediately and will get a free phone consultation with our firm.
Consultation with
------- Revised on 03.10.10

CLIENT WORKSHEET
DATE: ___________________

NAME: ________________________________ ~oo? _______

SPOUSE'S NAME (only if she/be needs to file bankmptey).___________

HAVE YOU FILED FOR BANKRUPTCY RELIEF?----- What year? _ __

IN ORDER. FOR US TO GIVE YOU ADVICE AS TO WHETHER OR NOT YOU QUALIFY TO

FILE CBAPI'ER 7 OR·l3!t WE NEED YOU TO COMPLETE TBEFOI.LOWING
QUFS110NNAIRE.
YOUR ASSETS
1. DO YOU OWN REAL ESTATE? YES/NO _________
**IS THIS A HOME WI1H A FOUNDATION, OR A MANUFACTURED OR MOBILE
HO~? _______________

IF no, Have you EVER owned any real estate?_ _ _ _ _ _ _ _ _ _ __

~mw.uhttand~--------------------------
IF yes, Howmoehis it worth?-----------------------
How much do you owe OD the first mortgage?---------------

Nwneof~----------------------------
What is your IDOIItbly paymeot? ----Are you current OD this payment?_ _

Hbehilld, howuumy moatbs do you owe?-----------------

How much do you owe oa the second mortgage?----------------

Nmnem~w ___________________ ~~-----

What is your monthly paymeot? _____ Are you current on this payment?_ _

Do you have a third IDOI'tgage or any other liens on your property,

iDduding a home equity liD.e?

Hso,J,l_~~~~~r_ftllcl~~~owed:,.
. . ...,._........,.........,...,._______~.---·-~·-~-
Do you owe property taxes? ______ How much?------------

Do you bave any other lieDs, judgmen& against this real estate? If so!t please explain.
2. DO YOU HAVE A CAR IN YOUR NAME? YES/NO _ _ _ _ __

IF YES, What kind of car is it? How much is it worth?_ __

How much do you owe on i t ? - - - - - - - Name of Creditor------

What is your monthly payment? _ _ _ Are you current on your payments? _ __

When was it purchased? _ _ _ _ _ _ When was it last financed? _ _ _ __

3. DO YOU HAVE A SECOND CAR IN YOUR NAME? YES/NO_ _ __

IF YES, What kind of car is it? _ _ _ _ _ _ _ How much is it worth?_ _ __

How much do you owe on it? _ _ _ _ ___;Name of Creditor_ _ _ _ _ _ __

What is your monthly payment? _ _ _ Are you current on your payments? _ __

When was it purchased?____ When was it last financed? _ __

4. DO YOU HAVE A THIRD CAR IN YOUR NAME? YES/NO._ _ _ _ __

IF YES, What kind of car is it? How much is it worth?_ __

How much do you owe on it? Name of Creditor------

What is your monthly payment? Are you current on your payments? __

When was it purchased? When was it last financed? _ __

5. DO YOU HAVE ANY OTHER VEHICLES IN YOUR NAME?

IF YES, Please list below.

6. DO YOU HAVE ANY OTHER ASSETS THAT HAVE A VALUE OF OVER

$1,000 INCLUDING ANY BUSINESSES? YES/NO?_ _ _ _ _ _ _ __

FOR EXAMPLE, DO YOU HAVE ANY OF THE FOLLOWING? yes or no

l)Boats? - - - - - - -
2) Lawsuits or claims against anyone to collect money? _ _ _ _ __

3} Potential Tax Refunds?------

-4} Retirement acco~ts? - - - - - - - - - -

~0thB? ________________________
 YOUR DEBTS
ASIDE FROM HOME MORTGAGES AND CAR LOANS, DO YOU OWE ANY OF THE
FOLLOWING? IF YES, STATE THE APPROXIMATE AMOUNT OWED. IF YOU DO NOT
KNOW FOR SURE, JUST ESTIMATE THE AMOUNT OWED.

1) WHAT IS THE APPROXIMATE AMOUNT OF YOUR CREDIT CARDS DEBT?

How many c a r d s ? - - - - - -
2) DO YOUBAVE ANY PERSONAL BANK LOANS? _ __

IF YES, AMOlJNT OWED?_ _ _ __

3) DO YOU OWE ANY LOCAL FINANCE COMPANIES? _ __

IF YES, AMOUNT OWED? _ _ _ __

4) DO YOU HAVE ANY LOCAL CASH ADVANCES?-----

IF YES, AMOUNT OWED? _ _ _ _ __

5) OOYOUBAVEANYFAMH.YLOANS? _ _ __

IF YES, AMOUNT OWED? _ _ _ _ __

6) DO YOUHAVE ANY .MEDICAL BILLS? _ __

IFYES, TOTALAMOUNTOWED? _ _ _ __

7) DO YOUBAVE ANY CAR LOAN DEFICIENCIES? _ __

IF YES, BOW MUCH IS OWED?-----

8) DOYOUOWETBEIRSORSTATE? _ _ __

IFYES, TOWBOMANDFORHOWMUCH?_ _ _ _ __

9) STUDENTLOANS? _ _ __

IF YES, TO WHOM AND FOR HOW MUCH?_ _ _ _ __

10) BUSINESSLOANS? _ _ _ _ _ _ _ _ _ _ _ __

11) OVERDRAFT FEES ON BANKACCOUNfS? _ __

IF YES, TO WHOM AND FOR HOW M U C H ? - - - - - -

 YOUR INCOME
WHERE DO YOU W O R K ? - - - - - - - - - - - - - -
What is your Occupation/Job T i t l e ? - - - - - - - - - - -

What is your salary or hourly r a t e ? - - - - - - - - - - -

How much do you bring home on payday?---------

Bow often do yon get paid?_ _ _ _ _ _ _ __

Bow long have you been t h e r e ? - - - - - - - -

WHERE DOES YOUR SPOUSE WORK?

What is your spouse's Oeeupation!Job T i t l e ? - - - - - - -

What is spouse's salary or hourly rate? _ _ _ _ _ _ _ _ __

How much does he/she bring home on payday?-------

Bow often does he/she get paid?_ _

How long has he/she been t h e r e ? - - - - - - - -

Any other income like Child Support, Pension or Social Security, part-time job?

What is i t ? - - - - - - - - How much do you get a month? _ _ _ __

Bas anything changed about your income recently, such as loss of overtime or unemployment?

How many minor cbHdren do you have? _ _ Ages?_ _ _ _ __

Anyone else living in your home? - - - - - - - - - - - - - - - -
Total household size: _ _ _ __

TOTAL-- NET INCOME FROM

- - - -

ALL SOURCES:
$______________
 YOUR MONTHLY LIVING EXPENSES
LIVING EXPENSES

FOOD $_ _ __

CLOTIUNG $._ _ __

HOUSEKEEPING SUPPLIES $_ _ __

PERSONAL CARE AND LAUNDRY $_ _ __

MISC. PERSONAL EXPENSES (PLEASE EXPLAIN) $_ _ __

HOUSING EXPENSES

RENT OR MORTGAGE PYMTS (escrow taxes?_ insurance?_) $._ _ _ __

SECOND MORTGAGFIHOME EQUI1Y LINE PYMTS $._ _ _ __

GAS AND ELECTRIC $_ _ _ __

WATER $_ _ _ __

PHONE, CABLE AND INTERNET $._ _ _ __

CELLPHONE $._ _ __

MISC. OTHER EXPENSES

MEDICAL AND DENTAL (NOT DEDUCTED FROM PAYCHECK) $._ _ __

Prescriptions
Copays
-----
GAS/OIL CHANGES $_ _ __

~T~ $_ _ _ __

CHARITABLE CONTRIBUllONS/TITHlNG $_ _ ___

INSURANCES (NOT DEDUCTED FROM PAYCHECK)

car $
life $----
health $~---
property $_ _ __

ALIMONY OR CHILD SUPPORT PAID TO OTIIERS $_ _ __

DAYCARE/SCHOOL EXPENSEs, CHILD RELATED COSTS $~---

CAR PAYMENTS #1 $_ _ __
#2 $_ _ __
STUDENT LOAN PAYMENTS
s ____.
TAX PAYMENTS $_ _ __

TOTAL MONTHLY EXPENSES $_ _ __

TOTAL DISPOSABLE INCOME (INCOME LESS EXPENSES) $_ _ __