Paul Horton: How Bankruptcy Works

You may have heard about the changes to the bankruptcy code. These can affect anyone considering filing for bankruptcy. It’s important to be well-informed and educated on the process, how it works, who is eligible and what the implications for filing bankruptcy are. That’s why you should always have a bankruptcy lawyer help you through the process. The new national bankruptcy law is now in effect; it changed the way that bankruptcy cases are filed, and decided, across the country. This new law brought with it a few extra steps that need to be taken by both debtor and attorney in a bankruptcy case.

Changes in Bankruptcy Documentation

The first thing that changed with this new law was documentation. Now, more documentation is required by the debtor who is filing for bankruptcy. Debtors must offer a more comprehensive overview of their income and expenses. Along with this comprehensive overview, a statement of accuracy document must also be submitted. If the listed expenses exceed the allowance stated by the IRS, another document called a “special circumstances” document must be submitted. Filing takes a few extra steps with all of the new necessary documents, but it shows the debtor’s financial struggles in much more detail, which is often used in their favor.

Required Credit Counseling

People who wish to file for bankruptcy are now required, by law, to meet with a credit counseling agency on two occasions. Debtors must receive counseling from an approved agency both before and after filing their bankruptcy case. Requiring counseling is the easiest way to know that the debtor is well-informed regarding their finances and options. Counseling also offers debtors alternatives to bankruptcy in the event they haven’t been well informed about their options.

The Means Test

With the new law came the “means test,” which determines whether a person is eligible to file for Chapter 7 bankruptcy. Before the new law, a debtor could choose whether he or she wanted to for a Chapter 7 or Chapter 13 case. There are now a series of requirements and calculations that determine what Chapter the debtor falls under. To qualify for Chapter 7 bankruptcy, a debtor must fit a the requirements after assessment of family size, household income, expenses and even inflation.

While these changes have made filing for bankruptcy a little more complex, an experienced bankruptcy lawyer can help you understand your options and how the bankruptcy process worked. Bankruptcy is still an incredible solution for relieving debts, but the assistance of an attorney is more helpful than ever.

The Role of a Trustee in a Bankruptcy Case

Ok, you are getting a fresh start on your financial situation and have filed for bankruptcy. One of the major players that you are going to be interacting with is a bankruptcy trustee. A bankruptcy trustee is a lawyer assigned to oversee your bankruptcy case. Their role in the case differs as to whether your bankruptcy case is Chapter 7 or Chapter 13.

Chapter 7 Trustees

In a Chapter 7 liquidation case, a trustee is selected at random from a panel of lawyers. Their main goal is to sell property and distribute the proceeds to creditors. In this process, a trustee sits down with the debtor during a “341 meeting” and asks them questions about their assets and financial affairs. From there, trustees review bankruptcy documents and is entitled to ask questions to find out if any nonexempt property, assets, or items that can be seized by the trustee and sold to satisfy debts.

Chapter 13 Trustees

In a Chapter 13 reorganization, a trustee’s role differs somewhat from a Chapter 7 bankruptcy trustee. A debtor still meets with a trustee in a 341 meeting and is asked about assets and financial affairs, however the trustee cannot take any of their property or assets. Instead, they assess the bankruptcy plan to see if it fits technical requirements and if it seems like it has a reasonable chance of success in repayment. Additionally, many trustees in Chapter 13 offer financial counseling and management. The Chapter 13 Trustee is also in charge of distributing payments from the debtor to qualified creditors. The trustee will sometimes refuse to pay creditors if they cannot prove that debts are owed them.

It is important to to remember a couple things about a bankruptcy trustee in order for a case to run smoothly and carefully. First of all, they aren’t your enemy who is seeking to suck you dry of all of your money and picking through your possessions to sell them off. An fact, most are quite reasonable people who are simply trying to do their job. In relating to a trustee, a debtor first of all needs to be honest. That includes an accurate listing of your assets because inaccurate disclosure can lead to criminal prosecution and a loss of discharge.

Trustees are not the only aspect of a bankruptcy case it is important to be informed about. If you are seriously considering bankruptcy and you live in Utah, Salt Lake, Park City, Orem or Provo, you need to consult with an attorney who understands Draper Utah bankruptcy laws. Not all bankruptcy attorneys are the same. While the process appears complicated, a Herriman Utah bankruptcy lawyer will be able to help you understand your options and avoid making bad decisions that you could later regret.

Free Consultation with Bankruptcy Lawyer

If you have a bankruptcy question, or need to file a bankruptcy case, call Ascent Law now at (801) 676-5506. Attorneys in our office have filed over a thousand cases. We will help you. Come in or call in for your free initial consultation.