If you are considering filing for bankruptcy in Tucson or Phoenix, Arizona, the process can seem intimidating and overwhelming.  And because most people filing for bankruptcy are already overwhelmed with debt and need immediate relief, trying to figure out all the requirements for debt relief can be particularly stressful.  Luckily, every consumer bankruptcy can be broken down into a series of discrete steps, which are described below.

Planning

The first and most important step of any bankruptcy is the planning.  This is the step at which you, and your attorney if you have one, review your financial situation, your debts, your assets, your income and expenses, and determine how bankruptcy can help you deal with your debt.  Some of the things that are determined during this step are: whether you qualify for bankruptcy, what type of bankruptcy will most benefit you, and when the bankruptcy should be filed.  Without proper planning, chances are high that you will not be able to maximize the benefits of bankruptcy, and you may even end up in a worse situation that you were in before bankruptcy.  For example, if the bankruptcy is timed incorrectly, it may result in you losing assets like tax refunds, or it may result in some of your debt, like taxes, being non-dischargeable.

One of the most important jobs of a bankruptcy attorney is to conduct this initial step of bankruptcy planning.  Ensuring that you choose the right type of bankruptcy and filed it at the appropriate time will make the rest of the bankruptcy process go much more smoothly.

Pre-Bankruptcy Credit Counseling

Before a person can file for bankruptcy, he or she must complete a session of pre-bankruptcy credit counseling.  This is a requirement of the Bankruptcy Code, and failure to complete the counseling will almost always result in the dismissal of your case.  The counseling must be completed within 180 days of the filing date, and it must be completed through one of the approved credit counseling agencies.  Your Tucson or Phoenix bankruptcy attorney can recommend a credit counseling agency, or provide you with a list of companies from which you can choose.  The good thing is that the counseling can be completed by phone or over the internet, and usually takes about one to two hours.  When you complete the course, you will receive a certificate of completion, which will have to be filed in court with your bankruptcy documents.

Preparation of Petition and Schedules

A significant portion of any bankruptcy case is spent on preparing the bankruptcy petition and schedules.  In Chapter 13 cases, you or your attorney will also need to prepare the Chapter 13 plan.  The process involves collecting detailed information that must be reported to the bankruptcy court.  This information includes: a list and valuation of all your assets; detailed information on each one of your debts, including the name and address of the creditor, the type of debt, and the outstanding balance; and information on your financial history and transactions, such as income you receive, your living expenses, and payments you made to others in the months leading up to the bankruptcy.

It is critically important that the information in the petition and schedules be accurate and complete.  For example, failure to disclose assets can lead to the denial of your discharge, or in extreme cases even to criminal prosecution.  And failure to list a debt can result in that debt not being discharged.

If you have a bankruptcy attorney, your attorney will likely spend a lot of time preparing these bankruptcy documents.  You will likely be asked to complete a questionnaire and  provide supporting documentation.  And the lawyer may follow up with you multiple times to obtain clarification and explanation for some of the information you provide.  All of this is a normal part of the process, and indicates that your lawyer is doing his or her job to ensure that your bankruptcy documents are as accurate as possible.

Filing for Bankruptcy

Once the bankruptcy petition and schedules (and the plan in Chapter 13 cases) are prepared and you approve them, your bankruptcy case will be filed.  The filing itself is a fairly simple process if you have a lawyer, and is done electronically.  If you do not have a lawyer, you will probably have to take all the papers down to the courthouse to get them filed.  The filing is an important step because it officially initiates your bankruptcy.  It also brings into effect the automatic stay, which prohibits most of your creditors from taking any collection actions, including calling you or sending you letters.

Meeting of Creditors

The next step in the bankruptcy process is the “meeting of creditors.”  It usually takes place approximately 30 days after you file for bankruptcy.  Despite its name, the meeting is a meeting between you and the bankruptcy trustee assigned to your case.  If you have a bankruptcy lawyer, your lawyer will participate as well.  The meeting is an opportunity for the trustee to ask you questions about the documents you filed, and to confirm their accuracy.  Your creditors can participate in the meeting as well, but in most consumer cases, creditors do not show up.  In the overwhelming majority of consumer bankruptcy cases, the meeting is fairly short, taking less than five minutes.  Although for a long time you were required to personally meet with the trustee at a courthouse or other venue, as of the writing of this article, the meetings of creditors are being conducted telephonically or via video conference due to COVID.  It is safe to say that most Tucson and Phoenix bankruptcy lawyers, as well as the overwhelming majority of people filing for bankruptcy, prefer the telephonic or video meetings, and hopefully the new procedures will remain in place permanently.

Post-Filing Financial Management Course

After your bankruptcy is filed, and before you can get your discharge, you will have to complete another course.  This second course is called the post-filing financial management course, or a debtor education course.  Just like the pre-bankruptcy course, it is something required by the Bankruptcy Code.  Luckily, this course is also done online or by phone.  When you complete this course, you will receive a certificate of completion, which will have to be filed with the bankruptcy court.

Payments into the Bankruptcy Plan (Chapter 13)

If you file a Chapter 13 bankruptcy, then you will have to start making payments into your bankruptcy plan within 30 days of filing the bankruptcy, and you will have to continue making the payments for the duration specified in your plan, which can be anywhere between 36 and 60 months.  The completion of the plan payments is normally a prerequisite to you successfully completing your Chapter 13 bankruptcy and getting a discharge.  Therefore, it is important to stay current on your payments as provided in the bankruptcy plan.

Approval of the Bankruptcy Plan (Chapter 13)

Although it may sound counterintuitive, in Arizona, approval of the Chapter 13 bankruptcy plan happens after you already started making payments under the plan.  The Chapter 13 plan must ultimately be approved by the court.  But in most cases, the person most critical to the approval of the plan is the Chapter 13 trustee.  Normally, the trustee will evaluate the plan that you or your lawyer submit to the court, and will provide his or her recommendations.  If you comply with the trustee’s recommendations, which may require changes to the plan, then the court will usually approve it without further questions.  Alternatively, you can request a hearing before the court and ask for the court to approve your plan directly, without approval by the Chapter 13 trustee.  However, in order to take this route successfully, your request for court approval must have adequate legal support, and you will have to show that your plan complies with all applicable requirements of the Bankruptcy Code.

Discharge

Your discharge will be entered approximately 2 to 4 months after the meeting of creditors (in a Chapter 7 bankruptcy) or after you complete your plan (in a Chapter 13 bankruptcy), and after you complete the post-filing financial management course.  The discharge is normally the ultimate goal of the bankruptcy.  It is a court order that effectively eliminates your debt that can be eliminated by law.

Collection and Liquidation of Estate Property (Chapter 7)

If you file for Chapter 7 and you have assets that are not exempt (protected) then the Chapter 7 trustee will liquidate (sell) these assets in order to pay your creditors.  Of course, if you have significant non-exempt assets, then Chapter 7 may not be the right choice for you, but in some cases the non-exempt assets are of sufficiently low value that Chapter 7 is still preferable to other alternatives, such as Chapter 13 bankruptcy.  The collection and liquidation of non-exempt assets can take from several months to over a year.  This process generally does not involve you directly, except to the extent that you have to turn over the assets to the trustee.  Once all of the non-exempt assets are converted to money, the trustee will distribute the funds among your creditors that file claims.  Not every Chapter 7 bankruptcy will require this step, and in fact in most Chapter 7 bankruptcies, there are no non-exempt assets to liquidate.

Closing of Case

After all of the above steps are completed, your bankruptcy case will be closed.  Once the case is closed, the trustee will cease monitoring or administering your case, and you will no longer be under the supervision of the bankruptcy court.  This is the final step of any bankruptcy case.

Need Debt Relief?  The Tucson and Phoenix Bankruptcy Attorneys at Yusufov Law Firm Can Help!

At Yusufov Law Firm PLLC, we help individuals and small business navigate all steps of the bankruptcy process.  Our goal with every client is to ensure that the bankruptcy process goes as smoothly as possible.  We can provide a free no obligation evaluation of your case, and advise you of your bankruptcy options.  To schedule a free consultation,  call us at 480-788-0098 in Phoenix/Mesa, or 520-745-4429 in Tucson, or contact us online.