Filing for Bankruptcy: FAQ's

Filing for bankruptcy can be a complicated process, and the petition itself consists of numerous pages which must be completed in exacting detail. Mistakes must be avoided at all costs as they will prove troublesome later in the court process. Below are some common questions and answers about filing for bankruptcy.

What is involved in the bankruptcy petition process?

The bankruptcy petition consists of the personal bankruptcy petition itself and 15-20 additional forms and schedules that must be filed with the court. The exact forms required will vary depending on the type of bankruptcy and the nature of the petitioner (Business, personal bankruptcy).

Must I list all of my personal property on schedule b?

Obviously, for most people listing every single item of personal property would be difficult if not impossible. Schedule b is outlined in such a way that you should be able to list all of the property that the courts deem necessary. Many items, such as clothing, can be grouped and given an estimated value. Avoid skipping any large items, such as tv’s appliances, cars/trucks, furniture, etc. Doing so may lead to a case being dismissed on the grounds of fraud.

How do I value the property on schedule b?

All property must be valued at it’s current market rate. For some items, such as a car, this is relatively simple. Simply look in the classifieds to see what your car is selling for. Other items may be more difficult to value. It is safe to put an estimate for items that are not readily sold, such as clothing, as this property will be abandoned by the bankruptcy trustee anyway.

Must I include property on schedule b that I will claim as exempt?

Yes, you must include all property. Exemptions will be listed separately on schedule c.

How are secured claims treated in a chapter 7?

Secured claims are typically not discharged but rather, the property securing the debt may be liquidated. Alternatively, you have options to keep that property and let the debt remain as if no bankruptcy had taken place.

What are unsecured priority debts?

Unsecured priority debts are those which fall into a small category of special, non-dischargeable debts. These include family support obligations such as alimony and child support, tax debt and student loan debt.

What are unsecured non-priority debts?

Non-priority unsecured debts are those which will typically be discharged, or eliminated, in a bankruptcy case. These include common unsecured debts such as personal loans, cash advance or payday loans, gambling debt, credit card debt and medical bills.

What are my options with unexpired leases?

In schedule G you will list out unexpired leases and contracts. It is up to you as far as how you would like to proceed with these. In some cases it is beneficial and financially sound to give up these leases. In many cases, a bankruptcy petitioner will be stuck in a lease for a car that is far too expensive. In bankruptcy, the car can be surrendered and the petitioner is free of any debts owed on the car.

How does my income and current expenditures matter in bankruptcy?

Depending on the types of bankruptcy you are filing, your income and expenditures serve different purposes. Under chapter 7 aside from having to qualify for chapter 7 per the means test, your income doesn’t play a critical role in the case. Under chapter 13, however, your income and expenditures are used to determine the monthly payment you will make into the payment plan. You will want to minimize this payment by maximizing your current monthly expenditures which results in a smaller monthly disposable income amount. There are many legal ways of doing this, such as maxing out your 401k, and you will want to get legal advice for this strategy.

What are my options for keeping non-exempt property under chapter 7?

In the Individual Debtors Statement of Intentions you will have the opportunity to address how your would like non-exempt property to be handled. You generally have two options when your equity in property exceeds the allowed exempt amount. You can reaffirm the debt, which means you will continue making payments towards the property, or you can redeem the debt by making a lump sum payment equal to it’s value. Again, you will want qualified legal advice regarding how best to protect any non-exempt property.

Who should have an attorney for a bankruptcy case?

Having a bankruptcy attorney represent your case is recommended for everyone. The bankruptcy court advises all petitioners to have an attorney represent them, and self-representation will not be considered in the event that a case is dismissed for any reason.