Filing bankruptcy is a complicated and tough decision and likely, an emotional time for most people. When first meeting with your bankruptcy lawyer, you may be overwhelmed and surprised with the amount of information the lawyer needs to analyze your case. This information is necessary to determine which type of bankruptcy is appropriate for your situation. The determination is largely dependent on your current financial situation. Once a determination is made regarding which bankruptcy chapter is the best fit for you, your Bloomington bankruptcy attorney will need significant information to prepare your bankruptcy petition and schedules for filing.
Be forthcoming with your Bloomington bankruptcy attorney, as filing for bankruptcy is all about complete and full disclosure. You may be embarrassed by your debts or reluctant to provide all information regarding your financial dealings to an attorney who is a complete stranger.
An experienced bankruptcy attorney will not judge you and will always treat you with dignity and respect. Bear in mind also that your attorney needs a complete picture of your financial situation to advise you properly. Withholding such information can result in an inaccurate assessment of your options, which can deprive you of some or all the benefits of bankruptcy.
Bankruptcy Chapters: An Overview
Prior to your meeting with your Bloomington bankruptcy attorney, you may want to get a basic understanding of the different types of bankruptcy that could be available to you and how your current financial situation may or may not qualify you for relief under each of them. Your bankruptcy attorney will review them with you and answer any questions you may have about them.
Pursuant to Title 11 of the United States Code, also known as the “Bankruptcy Code”, there are six chapters of bankruptcy. Each chapter is named for the corresponding chapter of the Bankruptcy Code. The four discussed below are the ones that apply to individuals and domestic businesses
Chapter 7 is known as the “liquidation” chapter for individuals or businesses. Often, most efficient and least expensive chapter to file for bankruptcy relief, it allows you to discharge most of your debt. However, you may have to give up some of your assets in exchange for your bankruptcy discharge. In order to qualify for this chapter, you must pass the “Means Test.” The “Means Test” is a formulaic worksheet, which determines whether your income is low enough for you to file for Chapter 7 bankruptcy relief.
Chapter 11 is known as the “reorganization” chapter. Often, Chapter 11 allows businesses to continue business operations, while proposing a debt repayment plan to repay creditors. This chapter is also available to individuals. However, Chapter 11 is quite costly and rarely used by individuals. When it is, the purpose is usually to protect a “non-exempt” asset, which would otherwise be forfeited in a Chapter 7 liquidation filing.
Chapter 13 is also known as a “personal reorganization” and is only available for individuals. A business entity may not file for bankruptcy relief under this chapter. Generally, individuals with a steady source of income will qualify to file under this chapter. Chapter 13 is also known as “Wage Earner Bankruptcy.” Chapter 13 is limited to filers with less than a certain amount of debt. Additionally, you must have sufficient income to propose a repayment plan to pay your creditors some portion of your debts.
Chapter 12 is a reorganization chapter for family farmers and fishermen. It is only available in limited cases, but provides higher debt ceilings and better exemptions than Chapter 13.
Your Bloomington bankruptcy attorney will analyze your financial situation and let you know which chapters you qualify for and will advise you on making the best choice.
Filing for Bankruptcy
Once you have decided to file for relief under a particular bankruptcy chapter, your attorney will need to prepare and file documents known as the bankruptcy petition or “Order for Relief” and bankruptcy schedules. The information needed to complete these documents is cumbersome. However, generally, bankruptcy schedules can be thought of in three categories: (1) a list of assets, (2) a list of liabilities (debts) and (3) income and expenses. Therefore, you should be prepared to discuss thoroughly the status of your assets, liabilities, and income and expenses.
Information Needed to Complete Your Bankruptcy Documents
You will be required to list all your creditors in your bankruptcy schedules at the time of filing. In preparation for the meeting with a bankruptcy attorney, you should begin gathering all documents including mortgage statements, credit card statements, doctor and medical bills, collection notifications, and all documents that contain the creditors’ contact information, including a creditor’s address and telephone number. On commencement of a bankruptcy case, the Court will issue notices to all creditors listed in your bankruptcy schedules. If you fail to list a creditor, you could end up still owing the debt after your bankruptcy is completed.
Additionally, you should provide information regarding your income to the attorney during your first meeting. Your income is a critical component in determining which bankruptcy chapters you qualify for. Therefore, plan to provide your lawyer with information concerning your income for the prior two years during the initial meeting. This includes W2 forms, income tax returns (both state and federal returns), and any other documentation that evidences your income.
If you qualify for filing under Chapter 7 or Chapter 13, you will be entitled to certain bankruptcy exemptions to protect some of your assets from your creditors while in bankruptcy. Exemptions determine what assets, such as a home, car, cash, money in the bank, or collectibles, you may keep in Chapter 7 and how much you are required to pay to certain creditors in Chapter 13.
Before your meeting with an attorney, you may want to familiarize yourself with the type of exemptions afforded to you and the dollar amounts associated with each exemption. Minnesota allows you to choose either the federal or state exemptions. Your bankruptcy attorney will review your assets and the available exemptions with you to help you make the choice that best achieves your goals.
To schedule your initial meeting with a Bloomington bankruptcy attorney, call Gregory J. Wald at (952) 921-5802.