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What happens in a bankruptcy case?

First, the debtor has to get credit counseling and then file papers in the federal court asking the court to discharge the debts. The basic steps of a bankruptcy are:

  • Counseling and Education: The debtor must go to an approved credit counseling agency within 180 days before filing for bankruptcy.  After the filing, the debtor must also attend approved debtor education within 45 days of the “creditors meeting.”
  • Filing: The debtor must file papers with the bankruptcy court.  Things that have to be filed with the court:
    • List of creditors (the people or companies you owe money to); 
    • Schedule of assets and liabilities (what you owned and what you have to pay); 
    • Statement of Income and Expenses; 
    • Statement of Intentions (who you can pay and who you cannot); 
    • Statement of Financial Affairs (what money you have and what money you do not have); 
    • Copies of all pay stubs for the 60 days before you filed for bankruptcy; 
    • Statement of your total monthly income; 
    • Statement of any changes  in your income that you think might happen in the next 12 months; 
    • Most recent income tax return. 
  • If you do not file all the required papers within a certain time, the court can dismiss your case.
  • Creditors Meeting: You must attend a meeting which may be attended by representatives of the persons and businesses to whom you owe money. The bankruptcy trustee or a court official presides at the meeting.   
  • Discharge:  The court orders that the debts be discharged.

This is a very basic explanation of what happens in a bankruptcy case. Each case is different, and many bankruptcy cases are very complicated.

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