In many cases the most intimidating part about filing personal bankruptcy is the notion that
unexpected issues may arise when you file. There isn’t ever a way to know everything about the
bankruptcy process, but here are a few things that may catch you off guard if you have never
filed bankruptcy before.
1. The cost of filing bankruptcy – Many people assume that filing bankruptcy doesn’t cost a
lot of money because the people filing it are already in tons of debt. This is simply not the case.
There are 2 sets of fees that filing bankruptcy typically includes: the court filing fee and the
attorney’s fees. The court filing fees are as follows: $306 if filing Chapter 7 bankruptcy and
$281 if filing Chapter 13 bankruptcy. Unfortunately the attorney’s fees are not that black and
white. Bankruptcy attorneys typically set their own fees on a case to case basis after evaluating
the amount of work that will need to be in order to file a case. In most cases attorneys charge
less to file a Chapter 7 bankruptcy because the process is normally quick and straightforward.
Chapter 13 bankruptcies are more expensive because they are typically much more complex
and require quite a bit more work on the part of the attorney.
2. The mandatory court appearance – During my time as a bankruptcy paralegal I noticed that
dozens of our clients were surprised to find out that a filing for bankruptcy required a court
appearance. The mandatory hearing is known as the “meeting of creditors” or “341 hearing”
and is usually held in the nearest bankruptcy courtroom in front of a trustee. Depending on
the Chapter of bankruptcy that you file the hearing could last anywhere from 8-25 minutes.
During the hearing the bankruptcy trustee asks the debtor a series of questions regarding their
finances, bankruptcy paperwork, and other items depending on their situation. Although all of
the creditors will be notified of the date and time of this hearing it is rare that they show up at
all. Nevertheless, most bankruptcy attorneys attend these hearings with their clients to avoid
confusion or worry.
3. The mandatory courses – Another requirement of anyone filing personal bankruptcy is the
completion of 2 credit courses: the “credit counseling course” and the “debtor education course”.
These 2 courses can be completed online, in person, or over the phone depending on what
the debtor feels most comfortable with. The courses typically take 30-60 minutes to complete
and they are not graded for right or wrong answers, just completion. The first course is called
the “credit counseling” course and must be completed before the case can be officially filed with
the court. The second course, known as the “debtor education” course and must be completed
after the case is filed and before the bankruptcy hearing date.
4. What debt must be included – Since the last major change to the bankruptcy laws in 2005
debtors are no longer allowed to pick which debts they do and do not want to file bankruptcy on.
Whether you are filing bankruptcy yourself or have hired an attorney, all debt in your name
must be listed in the official bankruptcy paperwork. However, this does not mean that all debt
listed will be wiped away, or taken away in the case of your property. If you have items such
as a mortgage or a vehicle the secured loans on those items will be listed in your bankruptcy
paperwork, but in most cases you will not lose those items if you stay current on your payments.
5. What debts cannot be erased – If you are filing Chapter 7 bankruptcy then you may
have heard it referred to as the “fresh start” bankruptcy. You should know that not all types
of debt can be erased by a filing Chapter 7 bankruptcy. There are certain debts known
as “nondischargeable” debts that bankruptcy is not allowed to erase. Some common
nondischargeable debts are: student loans, child support, alimony, or any other item owed to
the government such as parking tickets or back taxes. If the bulk of your debt falls into one of
these categories then filing Chapter 13 bankruptcy may be a good option for you.
FIling bankruptcy is sometimes be a necessary tool to getting your finances on track and
becoming debt free. Because of the negative stigma that sometimes surrounds it, filing for
bankruptcy can seem daunting, but if you are prepared with knowledge of the process you will
be better off. If you choose to hire a bankruptcy remember to have his or her number handy so
that if you do become overwhelmed with worries about the process you can pick up the phone
and ask. If you are unsure about how to start the process of filing bankruptcy, ask friends
or family if they have filed before or contact your local bar association for the number of a
bankruptcy attorney in your area.