In order to file a bankruptcy you must complete a series of documents that list all items that you own, all debts that you owe and all rights that you have. This also includes your income and expenses. If a business is filing, then there are a series of questions related to business issues. Everything you own or owe must be listed. This does not mean you cannot keep most, if not all, of those items that you list; this just means that you must be thorough in your listing all your debts and assets. Assuming that you have lived in Arizona for the last full 2 years, then the basic living items are exempt under Arizona law. I will review all these rules with you when we meet. Once the documents are completed they are signed and electronically filed with the Bankruptcy Court.
At a creditor’s meeting (it is very rare for any creditors to attend a consumer bankruptcy) you will be asked to testify that you have reviewed all the documents filed with the Court and that they are true and accurate. The court has approved the forms that must be used for these documents. They are called the petition, schedules, statement of financial affairs, statement of intentions, social security declaration, master mailing matrix, means test, employer declaration and other documents, depending on the circumstances. These forms are used to list all of your assets, debts, along with some recent financial history. The automatic stay goes into effect upon filing the petition. The automatic stay is very powerful. It stops all creditors from taking any action against you or your assets, without first obtaining a Bankruptcy order.
If you are filing a chapter 13 you must also file a Plan of Reorganization, with other documents related to the Plan. Some chapter 13 trustee’s have forms for these chapter 13 plans. In order to have a successful chapter 13 plan there must be in-depth analysis of income, expenses, arrears and fair market value of assets; along with certain transactions that you may have made before filing. All Debtors must appear at a §341 meeting, also called a creditors meeting. The Trustee assigned to your case will ask you questions under oath about your assets and liabilities and other important issues. Creditors can also question the debtor on those subjects, but seldom appear. By law the creditors must contact your attorney, not you. Your attorney will assist you in understanding your rights as to each issue the creditor raises.
If there are assets in a chapter 7 case which are not exempt, the Trustee takes control of those assets and usually, sells them at a public auction. You and/or your family/friends have a right to bid at that auction. From the sale of assets or the recovery of certain transfers or payments (called avoidance powers), the Trustee pays the expenses related to your case, and then distributes the remaining funds to creditors who have filed proofs of claims. In a chapter 7 case all wages you earn after the case belong to you. But, monies that were owed to you before your case was filed belong to your creditors, such as tax refunds, inheritances, accounts receivable, and money from any lawsuits. Generally, the only responsibilities you have after the 341 meeting is to cooperate with the Trustee in providing any information requested and assist your attorney in addressing any assets that you want to keep, but that are secured by a creditor.