I must admit, as a Paralegal, I am not a fan of filing Bankruptcy Petitions. It’s more of a personal preference. I know however, that understanding the general information needed for filing a Bankruptcy is crucial in our field. Why? because it is a tool used by many (individuals and corporations) to prevent creditors, collection agencies and even other individuals from pursing debts owed by the debtor. Knowing the basics is pertinent when you are assisting an attorney with a file. From verifying that a bankruptcy was not filed prior to proceeding with a lawsuit to even using it to stay a case. Understanding the basics will help you become a better a paralegal.

Let’s Start With The Basics

Here are some terms you will hear when filing a Bankruptcy:

Bankruptcy: a legal proceeding involving a person or business that is unable to repay their outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor’s assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt. Understand there are also different types of bankruptcies.

Debtor: a person or institution that owes a sum of money.

Creditor: a person or company to whom money is owed

THE PROCESS

The process of filing a Bankruptcy petition starts with credit counseling. It is a session that must be competed by the debtor at the start of the filing of a bankruptcy case. The credit counseling agency must be approved by the U.S. Department of Justice. In the session, the debtor and the counselor will discuss the individual’s budget and the pros and cons of even filing a bankruptcy. During this time, the debtor will also begin to gather supporting documents like tax returns, proof of finances, pay stubs etc. which will help your paralegal and attorney when they start the petition.

The bankruptcy petition is a form that discloses all of the debtor’s finances, income, assets, expenses and debts to the Bankruptcy Court. It contains a glimpse of the debtor’s financial circumstances and is categorized in Schedules.

Automatic Stay is another important aspect in a bankruptcy matter. It is a provision in United States bankruptcy law that temporarily prevents creditors, collection agencies, government entities, and others from pursuing debtors for money that they owe. The stay goes into effect as soon as the petition is filed. For most paralegals, this means a suggestion of bankruptcy might be filed in a matter you are assisting with.

Every debtor must attend the meeting of creditors aka a 341 Hearing which is conducted by the Bankruptcy Trustee assigned to the Court. The purpose of the meeting is for the Trustee to verify the information contained in the Bankruptcy petition.

The most important part of the bankruptcy filing is the discharge. A Bankruptcy discharge is a court order issued at the end of a bankruptcy proceeding. The order relieves the debtor from any obligation to repay the debts that have been discharged. Reaching the discharge status more times than not is the goal for the debtor.

Now that you have slight understanding of the process, doing your own reach is pivotal. The more you know, the more you can become an asset to your attorney.