Hi, I’m Patrick McBurney, and you’ve come to my office because you are in need of financial help and you’re considering filing for bankruptcy. I want to take a few moments to kind of describe that process for you and how bankruptcy works. One of the things that you thought of this morning is that, well, you’re coming to see me today and you believe that I can help you, but you’re not entirely sure how. Let me give you a brief overview of the bankruptcy process and how it works.
Bankruptcy starts by filing a petition with a bankruptcy court. The petition is a 50 to 70 page document that consists of the petition, the schedules, the statement of affairs, the statement of intention and the verification of the creditor matrix. These documents are all combined to be put into a bankruptcy petition. The first part basically identifies who you are, what kind of bankruptcy, your filing, and then you sign it to ask the court for permission to file for bankruptcy.
After that, we have the schedules, which are basically attachments to the petitions.
The schedules run A through J. Schedule A is where we list any real property or real estate that you own your home, any land that you have. Scheduled B is where we list any personal property such as vehicles, recreational vehicles, furniture, bank accounts, stock accounts, any financial interests that you have, any business interests that you have. Schedule C is where we exempt that property.
Now, interestingly enough, when you file for bankruptcy, everything that belongs to you ceases to belong to you, becomes the property of the bankruptcy estate. On Schedule C what we do is we take exemptions and we exempt your property. So, for example, if you own a home and you say your house is worth $200 and you owe $100,000 on the house, you have $100,000 in equity and you can exempt up to $125,000 of equity in your home if you have a vehicle. Generally speaking, if you owe more on your vehicle than the vehicles worth, then the vehicles worth nothing.
But if you have it, say your vehicle’s worth $5,000 and you owe $1,000, then you have to exempt $4,000. You can usually do that.
Most of the time, most people can find that they will be able to exempt all of the assets that they have in bankruptcy on Schedule C. Scheduled D, E and F are what I refer to as the debt schedules. Schedule D is were we list any secured debts such as auto loans or mortgages. Schedule E is we list debts that are entitled priority, meaning that if for some reason a piece of property in your bankruptcy was sold and there was money for creditors to receive, then those debts would get paid first and get paid in full.
An example of that is child support or taxes. Schedule F is where we list all of the other debts, including debts that are not entitled to discharge. What’s the most common debt that’s not dischargeable in bankruptcy?
That debt is student loans. Scheduled G is where we indicate whether you have a lease or contract. On Schedule H, we would list any codebtors that you have the example would be, is that your Uncle Ev co-sign for the car that you’re now driving. He would be a codebtor, but he’s not part of your bankruptcy, so he’s entitled to notice. Schedule I is where we basically take a look at your pay stubs and other sources of income and come up with a net income figure. Schedule J is where listed the expenses, rent, food, auto insurance, gas, car payments, that sort of thing. Those are the schedules and they’re attached to the petition. Then after that, we have the statement of financial affairs. The statement of financial affairs is essentially 26 questions that I’m going to help you ask. Examples include: where you’ve lived for the last three years? What kind of lawsuits are you involved in? Whether you’ve had any accidents from fire, theft, casualty, or gambling? Whether or not you’re storing property somewhere other than your own home? Whether you violated any environmental laws?
I will help you answer all of those questions correctly. After the statement of affairs, we have the statement of intention. Basically, you’re going to indicate on the statement of intention whether or not you intend to reaffirm one of your secured debts, i.e., your car, your mortgage. You’re basically going to enter into a reaffirmation agreement with the bank, which is basically a contract that says that as between us, we’re going to pretend that bankruptcy didn’t occur.
You’ll also indicate whether you’re going to surrender a vehicle. So, let’s just say that you don’t plan to keep your car. You’d indicate that on the statement of intentions. After that, we have the means test. The means test is where we determine whether or not you’re eligible to file for Chapter 7 or whether or not you’re going to have to file for Chapter 13. The means test, basically, let’s just take that single individual, I generally asked this question and most of my consultations, do you make more than $65,000 a year? If you make less than $65,000 a year, I generally know that you’re eligible to file for Chapter 7 bankruptcy. If you make more than $65,000 you may still be eligible to file for Chapter 7 bankruptcy. But I’m going to want to do some math to make sure that that you’re what we call an under median income debtor to ensure that you can file for Chapter 7 bankruptcy. If you’re not eligible to file for Chapter 7 bankruptcy, you will still be eligible to file for Chapter 13 bankruptcy.
So, in any event, you can still file for bankruptcy. It’s just a question of what bankruptcy you’re going to file. Finally, after that, we have the verification of the creditors matrix where you basically indicate that all the addresses on there are true and correct. Then you’re going to go to a meeting of creditors. The meeting of creditors is generally scheduled 30 to 40 days from when your bankruptcy is filed. It occurs at the federal building in Richland, Washington.
At the meeting, creditors, a bankruptcy trustee is going to identify who you are by looking at your driver’s license or other picture ID and looking at your Social Security card. He will then swear you in. Do you swear to tell the truth, the whole truth and nothing but the truth and then ask you a series of questions and it goes something like this. Are you Mr. Smith? Yes. Do you live at one, two, three Main Street in Kennewick, Washington?
Yes. OK, do you remember going to Mr. McBurney office and drafting a bankruptcy petition? Yes. Did you sign it? Yes. Did you list all of your assets and debts? Yes. Did you provide a fair value for your assets? Yes.
Are there any changes you’d like to make to your bankruptcy petition at this particular point in time? No.
OK, the answer should be no, because if it’s going to be yes, I’m going to want you to discuss that with me prior to the meeting of creditors. At this particular point, the bankruptcy trustee may have some additional questions, but most of the time you’ll say, are there any creditors here for Mr. Smith at this point, the bankruptcy trustee will ask, are there any creditors here for Mr. Smith?
Now, I’ve been doing this for a long time, for over 25 years. I can tell you that creditors rarely ever show up at these meetings.
If they do, they generally fall into three categories: angry ex-wives, angry business partners or Schwab Tire. Schwab Tire shows up generally to try to maintain a credit relationship with the with the perspective with a prospective client, and that that can be a good thing for rebuilding credit in the future. So it’s not a negative after the bankruptcy trustee calls for creditors and no creditors appear. That concludes the bankruptcy meeting. From that point forward, there’s about a 60 to 65 day clock that starts. That concludes the meeting.
From that point forward, there is a 60 to 65 day period that starts and at the end of that period, you receive a document from the bankruptcy court that indicates that your debts are discharged. Now, what you may not have realized before you came to my office is that the whole goal of my representation of you is to obtain a discharge in bankruptcy. A discharge order says that you are no longer legally obligated to pay the debts you had prior to when you filed for bankruptcy.
Discharge is the whole point of this process. And what I want to do is to help you get a fresh start. I want to help you start over financially by filing bankruptcy today, we can stop the calls. We can stop the harassment. You won’t have to feel scared to answer the phone. You won’t have to feel a sense of dread when you open your mailbox.
And a few months from now, you’re going to get a bankruptcy discharge. And that’s going to that’s going to basically clear all of this stuff that’s been going on before and basically give you a fresh start. And even though it may cost a little bit more, you might be able to find out that you’re going to be able to qualify for some kind of auto loan. You may very well be able to not have the burden of making monthly payments.
You’re going to be able to start over. And I want you to know that everything’s going to be OK.