Last updated Sept. 10, 2018.
A common question we bankruptcy lawyers hear a lot in initial consultations is, “How do I declare bankruptcy?”
According to Michael Scott, regional manager of the Scranton branch of the Dunder Mifflin paper company on the hit TV comedy The Office, you just walk out into the middle of your office and shout, “I. Declare. Bankruptcy!”
But if you remember that episode, you’ll remember that Michael was corrected by the office’s accountant, Oscar Martinez: “Hey, I just wanted you to know that you can’t just say the word ‘bankruptcy’ and expect anything to happen.”
So if Michael Scott got it wrong (and he did), then what’s the right way to declare bankruptcy?
At the risk of oversimplifying, here are four basic steps in the process.
Step 1: Hire a Bankruptcy Attorney
Hiring a Las Vegas bankruptcy attorney should be the first step you take when thinking of declaring bankruptcy, for two big reasons: In the first place, a lawyer can help you answer the question that ought to come before the one we introduced this article with: “Should I file for bankruptcy?” It’s possible that there are other options for you short of declaring bankruptcy.
But if you decide you should file bankruptcy in Las Vegas, a lawyer will help ensure that your case is properly prepared before filing and handled appropriately after. The Bankruptcy Code is a complex federal law that incorporates complex state exemptions laws, and it’s easy to get something important wrong without an attorney’s experienced guidance, including:
- Filing in the wrong bankruptcy court;
- Filing under the wrong chapter of the Bankruptcy Code;
- Omitting necessary documents or information from your bankruptcy filing;
- Failing to report all your assets and debts;
- Failing to take advantage of all appropriate Nevada bankruptcy exemptions; and
- Forgetting to take the required credit-counseling course.
These kinds of mistakes may result in your case being dismissed or your discharge being denied, making the entire ordeal pointless. A knowledgeable Las Vegas bankruptcy attorney can help you avoid all these mistakes and get a head start on your fresh start.
Step 2: Figure out Whether You Should File Under Chapter 7 or Chapter 13
Individuals declaring bankruptcy can choose to file under Chapter 7 or Chapter 13. Chapter 7 bankruptcy is known as “liquidation.” The bankruptcy trustee is supposed to gather the debtor’s non-exempt property, sell it, and use the money raised to pay off as much of the debtor’s debt as possible.
In practice, most debtors who are declaring bankruptcy under Chapter 7 own only exempt property, meaning that the trustee cannot take any of their property.
In a Chapter 13 bankruptcy, the debtor creates a repayment plan to pay off as much of his or her debt as possible over three to five years. The total amount that must be paid to creditors over that time depends, in part, on the value of the debtor’s non-exempt property (if any).
At the end of a bankruptcy case under either Chapter 7 or Chapter 13, the bankruptcy court typically grants the debtor a discharge, relieving him or her of the need to make any further payments on unsecured debts.
Which chapter is best for you depends on a number of factors, and in some circumstances you may only qualify for one or the other. A bankruptcy lawyer can help you understand your options and choose the best one for your circumstances.
Step 3: Put Together a List of All Your Assets and Liabilities
In accounting lingo, your “assets” refer to all the property that you own, whether it’s exempt or not. And your “liabilities” are your debts, secured (like car loans) or unsecured (like credit cards).
You will have to include this information with your bankruptcy petition when you file it with the bankruptcy court. An established Las Vegas bankruptcy lawyer will have software that keeps track of all these details and does the necessary calculations to help determine your status with respect to the “means test” in a Chapter 7 case.
If you fail to list some of your property or debt, you could lose your right to a discharge, have your case dismissed, or worse. As with the other steps, a lawyer can help ensure you stay on the right track.
Step 4: File Your Case
In Nevada, all bankruptcy cases are heard by the U.S. Bankruptcy Court for the District of Nevada. But where you live determines which divisional office you file your paperwork with. If you live in Clark County or one of its neighboring counties, you’ll file with the “Unofficial Southern Division,” which is headquartered in the Foley Federal Building in Las Vegas.
In the past, you had to physically deliver your bankruptcy documents to the bankruptcy court. But these days, your bankruptcy lawyer can file the petition instantly right from his or her desktop via the bankruptcy court’s electronic filing service.
Contact a Las Vegas Bankruptcy Lawyer for Help Declaring Bankruptcy
To learn more about how to file for bankruptcy, or for help understanding your options, please contact the experienced Las Vegas bankruptcy attorneys of Freedom Law Firm at 702-903-1398 for a free initial consultation.