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Getting a bankruptcy proceeding started on the right foot

For most people in Bradley County, the decision to file a bankruptcy petition can be inhumanly stressful. There are, however, ways to minimize the anxiety that results from filing a bankruptcy petition. This post will summarize the important initial steps that are essential to a proper beginning to a bankruptcy proceeding.

The 2005 Bankruptcy Act specified that all individuals who intend to file bankruptcy on or after October 17, 2005 must undergo credit counseling within 6 months prior to filing the petition and to complete a financial management instructional course after filing the petition. The next step is to determine whether the petition will be filed under Chapter 7 or under Chapter 13.

A debtor that wants to seek discharge of debts under Chapter 7 must pass a "means" test by showing that his or her median income is less than the median income for Tennessee. If a debtor fails this test, the petition must be filed under Chapter 13, which does not allow a complete discharge of debts in the manner of Chapter 7.

The next step may be the most laborious, but it is essential to a useful restructuring of a person's financial obligations. The debtor must compile a list of all debts, the names of the creditors and their names and addresses. The debtor must also provide a complete list of income sources, monthly living expenses and assets, which include both real and personal property. Creditors may also ask to see tax returns, and the last two years of returns should be assembled.

The final preliminary step is to determine which property may be exempt from the claims of creditors. The state of Tennessee and the federal government have separate lists of allowable exemptions, and the lists are not identical. Depending upon the debtor's financial situation, the assistance of an experienced bankruptcy attorney may be useful in selecting which exemptions to claim. The services of a bankruptcy lawyer may also be helpful as the proceeding moves along.

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