What individuals need to do and read before filing a petition under Chapters 7 or 13

Thinking of filing without an attorney? Click here. If you are looking for an attorney, then ask the local bar association. Anyone who provides a referral should give you at least three names. You should also check to see if the attorney you select has malpractice insurance. You may never need to make a claim, but it will be comforting to know if they have the insurance. Click here to go the Board of Bar Overseers web site where you can check if the lawyer you select has malpractice insurance. The same site will tell you if the attorney has been disciplined.

1. The 342(b) Notice - You must read and sign a document similar to this.

2.  The 527(a) Notice - You must read and sign a document similar to this.

3.  The 527(b) Notice - You must read this.

4.  The 527(c) Notice - You must read this

5.  Credit Counseling Services - Since credit counseling is mandatory before filing, you must do it. Here is a link to approved credit counselors. Remember that you should have the credit counseling certificate in hand before seeing an attorney. See also the Federal Trade Commission's brochure.

6.  The Credit Report - You should get a credit report and its free. Here is but one service to try: AnnualCreditReport. Send the report to your bankruptcy counsel.

7.  The Engagement Letter - You will be required to read and sign a similar letter before an attorney can represent you.

8.  Chapter 13 Checklist - This will give you an idea of the information that must be gathered and provided to the trustee and the court. For a Chapter 13 bankruptcy, you'll need a regular  income with something left over after you pay the bare necessities of life such as shelter, food and utilities. You must have no more than $1,010,650 in secured debt (for example, mortgages or car loans) and $336,900 in unsecured debt. These amounts are adjusted periodically to reflect changes in the consumer price index. The court filing fee is $274.

9.  Tax Returns - Federal tax returns for the last year must be provided as proof of income in both chapter 7 and chapter 13. If the taxes for the prior year have not been paid, you must do so before the bankruptcy can move ahead. In order for a chapter 13 plan to be confirmed, you must file all tax returns for the four year period before filing for bankruptcy. You must establish that you filed by the first meeting of the creditors. Seven days before that meeting, you are required to provide the trustee with a copy of your most recent federal tax return. If the returns are not filed, a chapter 7 discharge will not be granted and a chapter 13 plan will not be confirmed. Further, if your creditors request a copy of the return, you must provide it for them. Need a copy of previously filed returns? Go here: IRS

10.  The Client Questionnaire - You should fill out this form prior to any meeting with an attorney. It will give him or her a complete picture of your assets and liabilities.

11.  The Homestead - Do you own your residence? Do you have a homestead on it? While a homestead is automatic in New Hampshire, it is not in Massachusetts. You must file a homestead in Massachusetts in order to claim its benefits. You can file it on the eve of bankruptcy and still enjoy its protections, but it is too late after you file. See your attorney to get the form and make sure that it is filed. Even if you think you have one, check it twice. If there is a problem with it, the problem has to be fixed before you file a bankruptcy petition. See this Secretary of the Commonwealth link for more information on the homestead in Massachusetts. Even if your homestead is properly filed there may be some limitations imposed by the Bankruptcy Code on its use. Speak with your attorney about those limitations.

12.  The Chapter 13 Agreement Between Debtor and Counsel - In the event that you have to become a debtor in a Chapter 13 case you should read and understand the mandatory agreement between a debtor and counsel.

13.  Common Mistakes Debtor's Make - Sometimes mistakes are made.

       All creditors must be listed.  You may think that by not listing a creditor you do not make it, him or her part of your bankruptcy. That is not true and it could lead to a situation in which you have made a false oath and result in denial of your discharge. All creditors must be listed. After the bankruptcy is over you can pay those creditors you want to pay, but you have no obligation to do so. You should list all people who might have a claim against you even though you might think that their claim is frivolous. The bankruptcy is the opportunity to discharge all claims, frivolous or not. Some believe that if they do not list a credit card, they can keep and use the card going forward. Credit card companies scan debtor databases; they can cancel your card even if they were not listed.

     Don't transfer assets prior to the bankruptcy. Sometimes debtors think that they can put their real estate beyond the reach of creditors by transferring it to their spouse prior to filing the bankruptcy. Usually the transfer renders the debtor insolvent (if not insolvent already) and the transfer can be set aside by the trustee using the Bankruptcy Code's one year look back or the state law look back which can be as long as four years. Be wary of asset protection trusts for they will require experienced counsel and they are beset with traps. As for the transfer to a spouse or relative, it may jeopardize your discharge.

     All assets must be listed. It is not an uncommon event where a trustee in bankruptcy is examining a debtor and asks the question whether the debtor owns any real estate. The debtor will honestly answer, "no." However, the trustee has done a search at the registry of deeds and discovered that the debtor is the title holder to some real estate. The debtor then answers, "Oh, that is my mother's house; my name is on the title, but it is really hers." Wrong. It is yours and it is about to become an asset of your bankruptcy estate. You have to be honest and thorough and in situations such as these you have to consult a professional prior to the filing of the petition.

     Another situation is the disappearing asset. Sometimes a potential debtor will consult an attorney and in the discussion disclose an asset that the debtor really wants to keep. The attorney may advise that the asset cannot be exempted and will be sold by the trustee. That may be the last time that attorney sees that debtor until he or she notices that there is a bankruptcy case under the name of that debtor. Upon inspection of the schedules one will notice that the asset is not there. That is a recipe for disaster. As a debtor you need to be honest, truthful and thorough. Bankruptcy is a chance for financial rehabilitation and it is quite stupid to blow it.