For many people in Kentucky, filing for bankruptcy can be just what they need to turn the page on a tough time. But doing so can be intimidating, causing some to shy away. Much of that intimidation comes from not understanding the process. Fortunately, there's an easy cure for that: Knowledge. To develop your knowledge, keep reading.
The first step is to file a bankruptcy petition with the court. As part of that filing, Kentuckians will have to provide an assortment of financial forms such as a statement of financial affairs, a schedule of assets and liabilities, and a schedule of current income and expenditures. A filer will also have to provide copies of previous tax returns from recent years.
What information do these forms and returns provide to the court? Four main types. First is a list of the people who the filer owes money to, how much they are owed, and the nature of their claims. Second is the amount, frequency and source of the filer's income. Third is a comprehensive list of the filer's property. And fourth are the filer's monthly living expenses - mainly food, clothing, shelter and other essentials.
After a person files for bankruptcy, the court will appoint a trustee, a person who oversees the case and makes sure it goes smoothly. The trustee's role includes collecting payments and, when appropriate, distributing funds to creditors.
At the same time, the bankruptcy court will issue an automatic stay. This stay is a court order telling creditors that they must immediately stop trying to collect their debt. That means no more harassing creditor phone calls, no more obnoxious letters and so on.
From there, the trustee will arrange for a meeting between the filer and their creditors to discuss the filer's financial affairs and ability to pay. Out of this meeting will normally come a debt-repayment plan aimed at paying creditors back a portion of the debt.
Once the plan is approved, a filer will pay their creditors back for three-to-five years (each case is different). At the end of that period, whatever debt remains is discharged.
Kentuckians interested in learning more may benefit from speaking with an experienced bankruptcy attorney.
Source: FindLaw, "How Chapter 13 Works," Accessed Oct. 25, 2016