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The Seven Step Bankruptcy Process

Due to the confusion and fear of the bankruptcy experience I have set forth my SEVEN STEP PROCESS to explain the bankruptcy journey and where it leads. The first four steps deal with what happens before you file and the remaining three steps deal with what happens after you file.

Your financial matters have gotten so distressing that you know you must do something. You are confused and baffled by the enormity and detail of the information available. You must at this point start to help yourself and consult with a bankruptcy professional. Calling our office is the beginning of reorganizing your affairs so that you can have peace of mind and regain control of your life. (The steps below outline a normal Chapter 7 bankruptcy case.)

I. STEP ONE: At the initial meeting with one of our attorneys you will be fully informed of the bankruptcy process, what you must do and what you can expect from your attorney. There is no charge for the initial meeting. The meeting will last approximately 45 minutes. At this meeting:

A. DOCUMENTATION. You will receive several documents explaining the process and giving you valuable information that is required by the bankruptcy laws. These include:

1. Important information about bankruptcy assistance services from an attorney or bankruptcy petition preparer.

2. Statement of Information required by 11 U.S.C. Section 341. This is put out by the United States Trustee’s Office.

3. Information notice required by 527(a)(2)(A-D)

4. Retainer agreement and complete cost, expense and fee information about the process and the length of time it may take.

B. THE PROCESS. You will discuss the bankruptcy process, the various types of bankruptcy that can be filed and what decisions you must make, what the results of those decisions might be, the information you must provide, and what happens next.

II. STEP TWO: Once the decision to take the next step has been made, we must get to work and decide what type of bankruptcy is best for you. Most likely you will be considering either a Chapter 7 or a Chapter 13 bankruptcy. To make this decision we must fulfill a requirement of the bankruptcy laws known as the MEANS TEST. This is a new requirement of the bankruptcy code and requires you provide me with complete information about your income and complete data about your expenses. You may have to do some digging. Once I get this information I will be able to do the calculations necessary for the means test and we may be able to decide which chapter is right for you. Once we have received the information from you and have done the Means Test calculations we will get together and go over the situation. To get started and complete Step Two you will have to have available $750.00 for legal fees.

III. STEP THREE: Now we should know with some certainty:


1. Whether or not you are going to avail yourself of the protection of the bankruptcy law.

2. What chapter in bankruptcy you will decide on, a Chapter 7 or a Chapter 13.

3. What additional information we will need to take the next step.

B. INFORMATION GATHERING. “Step Three” starts off with more information gathering. We will have to have a current credit check done and may have to get outside opinions concerning the value of your house, car or other items that will be involved in filling out the schedules of the Petition for Bankruptcy. Next we must fill out the Bankruptcy Petition. This includes the Schedule of Assets; and Income and Expense affidavit; the statement of financial affairs; declaration of your intentions of what assets you would like to keep; the exemptions you are claiming; and what your agreement is concerning attorney’s fees.

C. PREPETITION COUNSELING. You will also have to complete the requirement of pre petition credit counseling. This can either be done at our office (which we recommend) or on your own. The law requires that you have further information about the process you are involved in from an independent party; that you are advised of the availability of financial counseling; and that you discuss with a counselor your financial situation. We have provided a link to the various credit counselors which have been approved by the United States Trustee’s office. The course should last about one and one half hours and can be taken in one or two secessions. The credit counseling agency you use charges for the certificate of completion. You must however take the counseling as it is a prerequisite for you to be able to file the bankruptcy.

D. STAGES. “Step Three” can happen in stages. It is the most expensive step. Another $750.00 will be due in legal fees; the filing fee to the clerk of the bankruptcy court is $274.00 for a Chapter 7 or $189.00 for a chapter 13, and there may be payment due for outside services that we have had to retain. There may two or even three meetings at our offices. Each of these, especially if your take the pre filing credit counseling at our offices, may last over an hour.


IV. STEP FOUR: Once the case is filed what happens? While your next involvement will be attending what is known as the “341” meeting, which will be someplace between 20 and 40 days after the case is filed, two very important things have occurred.

A. THE AUTOMATIC STAY. First, the automatic stay is now in effect. This should stop all creditors from harassing you and stop all collection proceedings that creditors may have started against you. While the stay can be lifted, in most cases it stops any further creditor activity outside of the bankruptcy system.

B. THE TRUSTEE. Second, a Trustee, appointed by the United States Trustee’s Office, becomes the owner of all of your assets. The Trustee is an extremely important and powerful. The Trustee’s job is to find out what assets you have; to collect them; sell them; and distribute the money received to your creditors. How does the Trustee know what you have? If you will recall Step three, we filled out the asset schedules; noted the exemptions you will be using and stated what you income and expenses are. One of the tough things about Step Three was collecting and making sure the schedules were correct.

C. PAYMENT. Prior to the “341” meeting your last payment for legal fees will be due in the amount of $300.00.

V. STEP FIVE: After the meeting you will have to attend a “341” meeting. What is the “341 meeting”? The number “341” simply means that paragraph number 341 of the bankruptcy code provides, in part, that the Trustee will have a meeting, which you MUST attend, where the Trustee and any creditors who want to attend may ask you questions about your assets. Since we will have done a thorough job in preparing the bankruptcy petition and its schedules and will have met with you and prepared you for the “341” the meeting should not have any surprises. We will have to get together for approximately a half an hour sometime before the meeting and go over what will happen. We will then attend the meeting with you. Typically the Trustee’s meeting is short. The Trustee is not a Judge and while the meeting can be informal in nature it is very important and is not to be taken lightly. Once the meeting is over, depending on the particulars of your case the process is essentially over. You will receive in the mail a “discharge” from the bankruptcy court. At this point the Trustee no longer has control over the assets you have retained.

VI. STEP SIX: Under the new bankruptcy act, there is now an additional requirement for post petition financial counseling. Frankly, at this point the whole procedure is so new that there is no definite information about what this will entail. There is no need to delay in seeking the relief provided by the bankruptcy system due to this. By the time your case has reached that far, we will have all of the necessary information and be able to help you conclude the process.

VII. STEP SEVEN: The official process is now over. What has happened and what do you do now? Essentially your financial life has been restructured. You should be able to pay your bills and start rehabilitating your credit. We have several helpful tips and handouts to help you with this process. While Bankruptcy and the Bankruptcy process is sometimes hard and debilitating, it can and should be the new “fresh start” for you and your finances. Our office is with you the entire way, advising you, answering your questions, and handling your relationship with the bankruptcy court and the bankruptcy process.

(We would note that the “Seven Steps” outlined above are generalized and do not fit every case. Each Bankruptcy case has its own facts and circumstances. Hence since no two cases are alike, the Seven Step Process will necessarily differ for each case. If you have decided to file a Chapter 13, there are two additional steps; the legal fees are higher; and the process takes more time. The Chapter 13, in most cases, presumes that you will retain your assets and make payments to the Chapter 13 Trustee.)

The Law Offices of C. David Ward are proud to represent clients located in Aurora, Illinois, Oswego, Naperville, Sandwich, Plano, Elgin, Joliet, Bolingbrook, Romeoville, West Chicago, St. Charles, Batavia, Geneva, Rockford, Kane County, Kendall County, DuPage County, Dekalb County, Will County and all of the surrounding areas.


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