There is more than a grain of truth in the expression "fear of the unknown". And where bankruptcy is concerned, a little trepidation is certainly understandable; after all, how many people are well versed with the procedures involved in a bankruptcy filing? Apart from bankruptcy attorneys, regular practitioners, and the like, probably very few would be truly familiar with those procedures. So if you're considering the possibility of bankruptcy, but the whole notion is a little bit frightening, perhaps the information that follows might help dispel some of that fear...
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Prior to Filing
Prior to filing bankruptcy, a debtor is required to take a credit counseling class by an approved credit counseling provider. This class does not require personal attendance - it can be completed online or even over the phone. Numbers vary, but the typical bankruptcy district will have a list of between 12 to 15 court-approved providers. Their fees vary only slightly, usually ranging from $30 to $50. The fee can be waived with a showing of hardship, e.g. by providing the counseling agency with an SSA disability determination letter.
Filing the Petition
The certificate proving completion of this credit counseling class is then attached to and filed along with your 'petition', which is the official document that contains all necessary information on your debts, assets, expenses, and income. The bankruptcy attorney will complete this petition for you, using information provided by you including, for example, such documents as appraisals, paystubs, 1040's, and W-2's. The bankruptcy attorney will also need mortgage, car loan, and credit card statements, along with any collection letters and/or lawsuits pertaining to those accounts. If you've lost or misplaced those documents, some bankruptcy attorneys offer, for a small incremental fee, a service whereby they directly access your credit history so as to obtain the necessary information. Because petition preparation and filing are done electronically, they can be done very quickly - literally within a couple days if necessary - a fact worth noting if you're under a time crunch with, for example, an imminent sheriff sale or other legal proceeding.
After Filing
Shortly after your petition is filed, a case trustee is assigned. This trustee is simply the person appointed by the court to oversee your case. Also within a few days after the petition is filed, a "creditors' meeting" is scheduled. The date for this meeting is typically about a month after the petition is filed. At this meeting, the trustee reviews your case and asks questions regarding your petition. These sessions are usually quite brief, often no more than 5-10 minutes if your petition is in order and your case involves no unusual complications. Your attorney will be present at this meeting to assist you in answering the questions and providing the requested information.
Within 45 days after that creditors' meeting, you will need to do a second credit counseling session (called a "pre-discharge financial management course") to qualify for your discharge. Just like the first one (that is, the "pre-filing" class that must be done before filing), it can be completed online or over the phone. The fee is again $30 to $50 per household.
About 3 months after the creditors' meeting - sometimes a bit sooner if the case involves no complications, you will receive your official discharge notice in the mail from the Bankruptcy Court. That's about 4 months altogether from the time your petition is filed until your case is closed and your debts are officially discharged.
Summary
Most cases do indeed follow the general outline described above, so long as your petition is accurate, in order, and within the statutory limits of asset and income levels so as to qualify for a Chapter 7 discharge. To be sure that this is so for your particular case, you'll want to have an experienced bankruptcy attorney help you through the process, and to answer any other questions you might have.
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