When you file a bankruptcy, our office is required to collect certain information from you and provide copies to the trustee who is assigned to your case. Therefore, we need to have the following information in-hand before we can file your petition:
1) Paycheck stubs from employment for the past 90 days prior to filing (6 months for a Chapter 13). This requirement applies to wages received by your spouse as well, regardless of whether or not your spouse is filing bankruptcy with you, unless you are separated from your spouse and he/she does not live in the same household.
2) Documentation of any other income you receive such as unemployment compensation, social security, SSI, pensions & retirement, welfare, alimony & child support, workers compensation, etc. received in the last 90 days prior to filing. This requirement applies to income received by your spouse as well, regardless of whether or not your spouse is filing bankruptcy with you, unless you are seperated from your spouse and he/she does not live in the same household.
3) Copies of the past 2 years Federal and State income/business tax forms, including all Schedules and W-2's (4 years of tax returns for a Chapter 13). You will also have to certify to the bankruptcy court that you filed your taxes for the past 4 years if you were required to do so. If you have not filed your taxes in any of the last 4 years, our office is a licensed IRS tax preparer and can file them for you, if needed. If you did file, but misplaced the forms, you can also fill out an IRS request form for a copy of your taxes or a transcripts of your taxes. If your taxes were completed by a tax preparer such as H&R Block or Jackson Hewitt, they often provide additional copies to their clients for free, so you can just go to where you had them prepared. Click here to download the IRS form for obtaining a copy of your federal tax return(s), or click here to download the IRS form for obtaining a free transcript of your federal tax return(s). To obtain a copy of your Illinois State tax return, please click here.
4) Copies of bank statements for the 2 most recent months for all checking, savings, investment, and/or retirement accounts. After you file, we will also need to obtain updated bank statements showing the balance that was in each account on the date of filing of your bankruptcy case.
5) Copies of Divorce decrees and/or Marital Settlement agreements if you were divorced within the two years prior to filing.
6) Copies of Closing documents if you sold any real estate within the two years prior to filing, or copies of any appraisals done of real estate currently owned if done within the last two years.
Our office files Chapter 7 and Chapter 13 bankruptcies for clients who live within the region served by the Bankruptcy Court for the Central District of Illinois. The BAPCPA went into effect on Ocober 17, 2005, and made quite a few changes to the bankruptcy laws. The majority of clients, however, are still able to file a bankruptcy and discharge their debts either in full under a Chapter 7, or by only paying a percentage of your debt with low monthly plan payments in a Chapter 13.
The law changed on October 17, 2005, with BAPCPA, and made certain higher-income individuals ineligible to file a Chapter 7 bankruptcy, forcing them into a Chapter 13. This was the implementation of what is commonly referred to as the Means Test. The Means Test income threshold is based on the median family income, by household size, for the geographic region. (Whether someone can be claimed as a household member is dependent upon whether or not you claimed them as dependents on your most recently filed tax return.) If the Debtor(s)' income is over the Means Test threshold figure, they are more likely to be required to file a Chapter 13, although this is not always true. For more information concerning the current income threshold figures and how they are applied to each Debtor's case, please see our article entitled Am I Eligible to File a Chapter 7 Bankruptcy?
If the Debtor(s) are over on the income threshold and deemed ineligible for a Chapter 7 due to excessive income, the Debtor(s)’ Plan in a Chapter 13 is also required to be a 5 year Plan, unless the Debtor(s) can pay 100% of their unsecured debts owed in less than 5 years.
Even though a Debtor(s) may be eligible for a Chapter 7 based on income, certain individuals elect to file a Chapter 13 for other reasons. If a Debtor is behind on a secured debt that he wishes to keep, such as a house or a car, he will opt to cure the arrearages in a Chapter 13. A Chapter 7 will not save property in which the Debtor is not current at the time of filing.
People are often worried that they will lose property if they file bankruptcy. This is rarely the case. Individuals are allowed to claim certain exemptions of their assets in bankruptcy. For more information about what types of property can be kept when you file bankruptcy and how the Court values your property, please see our article entitled What Property Can I Keep if I File Bankruptcy?
Not all debts are dischargeable in a bankruptcy. The following debts are considered “priority debts” by the bankruptcy court: alimony, child support, back taxes, student loans, anything that you owe the government (i.e. fines, parking tickets), debts from personal injuries to others resulting from a DUI or reckless driving. These types of debts generally are non-dischargeable in a Chapter 7 and must be paid in full during the course of the plan in a Chapter 13.
Additionally, cash advance loans taken out within 120 days prior to the filing of bankruptcy cannot be discharged. This also applies to refinancing of previous loans. Therefore, it is advised that Debtor(s) wait this 120 period before filing, place “stop payments” and/or cancel any electronic transfers with their bank, and resist refinancing these types of loans. Examples include Heights Finance, World Finance, and Pay Day Loan companies. Let your attorney know if you have any other these types of loans, as special care must be paid to assure your discharge of these debts.
All debts need to be listed on the bankruptcy schedule, regardless of whether or not they are secured, unsecured, or priority debts. In a Chapter 7, with most secured debts, you have three basic options: reaffirm the debt, redeem the property for the market value, or surrender the property to the creditor. If you wish to keep the property secured by a lien, you and the financing company will need to sign and file a reaffirmation agreement with the court. This agreement basically re-instates the debt with the exact same principal balance, interest rate, and other terms, as if a bankruptcy was never filed.
You can also choose to redeem the property by paying the creditor the current market value of the property instead of what is owed. This has to be done by Motion filed with the Court, and the Debtor is generally required to pay the redemption amount in one lump-sum payment to the creditor during the bankruptcy. This is a good option for Debtors who owe a lot on something that is now worth very little. However, since it must all be paid in a lump-sum, is rarely an option in cases where the market value of the item is very high.
The third option is to surrender the property and walk away free and clear. The creditor gets the collateral and is free to sell it and get what they can, but the debt owed by the Debtor to them is discharged in the bankruptcy.
There is also a fourth option, in cases where the Debtor has put property down as collateral for a loan that they already owned prior to the loan being made. An example of this is a cash advance company which asks the Debtor to sign a document which makes his existing household furniture and electronics collateral for the loan. These types of loans impair the exemption the Debtor has in his personal effects, and thus this lien can be avoided by filing a Motion with the Court. Avoiding the lien on this property makes the debt then unsecured and dischargeable in bankruptcy. Again, the date of the loan must be more than 120 days prior to the bankruptcy filing in order to be dischargeable.
In a Chapter 13, you will be paying your regular monthly mortgage payments outside of the Plan, while any arrearages you owe at the time of filing will be paid inside the Plan. Cars are usually paid for inside the Plan, and depending on the length of the loan the principal balance and/or interest may be able to be reduced. Other property liens can be "crammed down" to market value and paid over time at a reasonable interest rate inside the Plan. You can also opt to surrender property in a Chapter 13, but the difference between the amount you owe and the amount the item is worth becomes an unsecured debt that you will be required to pay on in the Plan.
A Chapter 7 is referred to as a "fresh start" or a "clean slate" bankruptcy. This is liquidation bankruptcy. In a Chapter 7, the trustee can sell any of the Debtor(s)' assets ("liquidate") which are over allowed exemption amounts, in order to pay off a portion of the Debtor(s)' unsecured debt. Normally, assets do not get liquidated in a Chapter 7, but your attorney can explain more about this process after reviewing your asset situation.
A Chapter 13 is a wage earner Plan, so you must be employed. It is essentially a repayment plan bankruptcy, but usually not a complete repayment of the Debtor(s) debts. The Debtor(s) are required to pay back a portion of their unsecured debt (a minimum of 10%), in installments over the course of 3 to 5 years. There can be advantages to a Chapter 13, such as the elimination of accruing interest, preventing foreclosure or repossession, and the possibility of reducing principal and/or interest on certain financed vehicles, which can be discussed with your attorney.
Within 180 days prior to filing bankruptcy, the Debtor(s) must complete a pre-filing Debtor counseling course through an approved agency. The Debtor(s) are required to file the certificate of completion of this course with the Court at the time they file their Petition.
The filing of the bankruptcy begins what is referred to as the “automatic stay” of bankruptcy. This prohibits any further collection of debts or enforcement of liens against the Debtor. The filing halts all lawsuits that are pending against the Debtor, and is also the day interest ceases accruing in a Chapter 13. Valuations of property are based upon their value as of the day of filing, and only debts accrued prior to the filing date can be discharged by the bankruptcy.
Approximately 30 days after filing, the Debtor will be required to attend a §341 Meeting of Creditors. They are usually held on the last Wednesday of the month for Chapter 13's and on Thursdays for Chapter 7's. THE DEBTOR(S) MUST BRING A DRIVER'S LICENSE/STATE ID AND THEIR SOCIAL SECURITY CARD TO THE MEETING. The meeting is held before a Bankruptcy Trustee, not a Judge, but is under oath. In a Chapter 13, the Debtor(s) first Plan payment is also due 30 days after filing.
Within 45 days of filing in a Chapter 7, the Debtor(s) should have either reaffirmed, redeemed, or surrendered their secured property, based on their filed Statement of Intention.
Chapter 13 Debtors make monthly Plan payments to the trustee, and the Plan can last anywhere from 3 to 5 years, based upon the income of the Debtor(s), the amount of debt to be paid through the Plan, and the ability of the Debtor(s) to make the required monthly payments. The payments can be automatically withdrawn from wages by your employer, or a Debtor can opt to pay the trustee directly.
Prior to a bankruptcy discharge being granted, the Debtor(s) will be required to attend a second counseling / Financial Management course and file a certificate of completion. In a Chapter 13, after all Plan payments have been made under the Plan, the Debtor must file an Affidavit stating that he/she does not owe any Domestic Support Obligation arrears (alimony / child support), as arrears were supposed to be paid in full in the Chapter 13 Plan.
The Bankruptcy Discharge will be granted approximately 90 days after filing in a Chapter 7, and after all Plan payments have been made in a Chapter 13 and provided that the Financial Management course certificate is on file.
Whether you are thinking of filing a Chapter 7 or a Chapter 13 bankruptcy, the first step that you need to take is to complete a Debtor Education course. This course is required to be completed before you file your bankruptcy, and the Certificate of Completion has to be included with your bankruptcy petition at the time you file, so hang on to it and do not lose it. The Certificate is valid for 180 days after taking the course, so you have approximately 6 months to get the rest of your documents in order so that you can file. You may take the course with any approved counseling agency, however, we have shopped rates and generally use one of the following credit counseling agencies. The cost varies by provider, but is relatively nominal. Most agencies offer the course either online or by telephone via a toll-free number. Most accept credit & debit cards, cashier's checks, money orders, e-checks, and PayPal as methods of payment.
Prior to a bankruptcy discharge being granted, the Debtor(s) will be required to attend a second counseling / Financial Management course and file a certificate of completion. We again use the following credit counseling agencies for the 2nd class. Most offer the course either online or by telephone via a toll-free number. The cost varies by provider, but is relatively nominal. Most accept credit & debit cards, cashier's checks, money orders, e-checks, and PayPal as methods of payment.