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The 6 Stages of Bankruptcy

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While most people know that bankruptcy is a way to discharge or eliminate debt, few know how it happens.

Not knowing what to expect during the bankruptcy process can make the idea more intimidating than it has to be. In reality, the filing for bankruptcy protection is not overly burdensome. And with help from an experienced and committed Cleveland bankruptcy law firm, you can usually go through the whole process with ease.

To discuss if bankruptcy is the right option for you, call (216) 586-6600 today and set up a free and confidential consultation.

How Long Does Bankruptcy Take?

The bankruptcy process lasts about three to four months from start to finish for Chapter 7 filings. Chapter 13 takes the same amount of time to file, but because you pay down some of your debts over time, the payment plan may last three to five years.

At the end of either bankruptcy filing, your debts will be discharged and you will be free of the bankruptcy court.

The Six Steps in a Bankruptcy Process

There are six steps to a bankruptcy. While certain bankruptcies will be more complex than others, you and your bankruptcy lawyer will work through the stages until your debts are formally discharged.

Step 1: Pre-Bankruptcy Counseling

Before filing for bankruptcy, you must meet with a government-approved credit counselor to discuss the possibility of filing for bankruptcy within the next six months. At this one to two-hour meeting, you will discuss your financial situation, the bankruptcy options, and start a personal budget. Most of the time, your bankruptcy attorney can suggest a counselor.

Step 2: Filing the Bankruptcy Petition

The bankruptcy petition is the most complicated part of this process. The petition is an intricate document that describes and categorizes all of your outstanding debts using a strict format.

Generally, a bankruptcy lawyer will create this document for you after asking you questions about your financial situation and looking over your financial documents.

Once your lawyer collects the information and drafts the document, you formally file the petition with the courts. This officially starts the bankruptcy timeline.

Step 3: Automatic Stay

As soon as you file for bankruptcy, the courts will issue an automatic stay. The automatic stay is a court order that prohibits your creditors from contacting you to collect on your debts.

To do this, the bankruptcy court sends out a Notice of Filing and a Notice of Stay to your creditors. This makes it illegal for your creditors to continue trying to collect on your debts and stops any collection proceedings, like lawsuits.

During the automatic stay, your creditors may only contact your lawyer, and all the calls should stop.

Step 4:Creditor’s Meeting

About a month or two after filing for bankruptcy, you and your attorney will attend a creditor’s meeting set up by your bankruptcy trustee. Generally, this meeting lasts less than an hour (or sometimes as short as five minutes!) and is attended solely by you, your representation, and the trustee.

Creditors may attend to lodge any complaints or otherwise present their case, but this is very rare.

Because there are limited ways that creditors can contest a bankruptcy discharge (such as fraud or other illegal activity), you are unlikely to have to deal with this. Most of the time the trustee will simply ask a few questions and then deal with your attorney to finalize any questions or concerns.

If you are filing for Chapter 7, the trustee will follow up by formally approving the filing. If you are filing for Chapter 13, the trustee will set up a payment plan for the next three to five years.

At no time during this, should a creditor contact you directly.

Step 5:Debtor Education Course

Before the bankruptcy is finalized you must complete an approved debtor education course. Many can be completed online, and they take an average of two hours to complete.

During the financial counseling course, you will be taught how to create a budget, manage money wisely, and use credit appropriately.

Step 6: Notice of Discharge

After you finish all of this, your debt will be discharged.

In a Chapter 7 petition, this occurs after the trustee looks over the bankruptcy filing and finds no major problems. During a Chapter 13, this happens after you finish the agreed-upon payment plan. In either case, you will receive a Notice of Discharge, which means that any included debt is cleared from your record.

Ohio Bankruptcy: A Clean Slate

After your debts are discharged by the courts, you have a fresh start. Bankruptcy offers you the chance to get your financial health back in place and begin again.

Although many people believe that filing for bankruptcy is a long, difficult process, it generally is not. As you can see, there are only a few basic steps you need to go through. With the help of an experienced Ohio bankruptcy lawyer, it becomes simple for anyone.

Call LHA to Get Started

If you are considering filing for bankruptcy in Ohio, Luftman, Heck & Associates is prepared to work with you every step of the way to make these proceedings as simple as possible for you. Call our Cleveland bankruptcy law firm today at (216) 586-6600 for a free consultation on your specific situation. Find out if bankruptcy may be a way for you to recover financially.