What You Should Know before Signing and Filing a Bankruptcy Petition

Before your bankruptcy case is filed with the bankruptcy court, you must review and sign the bankruptcy petition. Other required forms usually are signed at the same time — such as the statement of financial affairs, the schedules , the means test, and the statement of intention. Before the signing appointment, you already should have provided your attorney with any additions, corrections, changes or updates to the official forms.

Your case will be filed electronically with the bankruptcy court on the day that you sign the bankruptcy petition, or within a couple of days thereafter. As a general rule, you are not eligible to file a bankruptcy unless you have completed credit counseling within 180 days before the petition date. An improperly filed case may be dismissed by the bankruptcy court.

The filing date, also known as the “petition date,” is important for two reasons. First, the filing of the bankruptcy petition starts an automatic stay, which prevents most creditors from taking further debt collection action against you or your property. Secondly, the filing of the bankruptcy petition creates a bankruptcy estate.

The bankruptcy estate, or property of the estate, includes all real estate, personal property, rights or claims that you own, that you have a right to, or that may be in your name. You can exempt, or protect for yourself, certain amounts of certain kinds of property from the bankruptcy estate. Unlike a petition preparer, a bankruptcy attorney can give a consumer debtor advice about prebankruptcy planning and about the exemptions to which a debtor may be entitled.

Approximately one month after the petition date, you will be required to attend a creditors’ meeting, which is also called the 341 meeting. The 341 meeting is conducted by a bankruptcy trustee, who has a duty to collect and liquidate nonexempt property of the estate to pay creditors. In addition to other questions at the 341 meeting, the trustee probably will ask the following:
  • How much cash on hand or what undeposited checks did you have on the petition date? Cash on hand includes money in your wallet, at home, or anywhere else other than a financial institution like a bank or credit union. Giving money or anything else to Uncle Albert to hold for a couple of days is not helpful. Not only is Uncle Albert considered an “insider,” but the transfer of an asset to anyone else to put it out of your hands on the day that you file bankruptcy may be either a preference, if money is owed to the transferee, or a fraudulent transfer. The trustee can recover a fraudulent transfer or a preference for the benefit of creditors. If the trustee recovers a voluntary transfer, you may not be allowed to exempt property that could have been protected if the transfer had not been made. Moreover, intentional fraud may disqualify a debtor for a discharge of debts under the Bankruptcy Code.
  • How much money was deposited or invested with any financial institution on the petition date? The trustee will want to see a statement showing the balance for each of your checking, savings, or investment accounts, including any retirement, investment, or brokerage accounts or mutual funds. 
    • The trustee will consider the actual balance in the account that is not entitled to an exemption to be property of the estate and will not subtract any checks outstanding as of the petition date (checks that have been given for payment but that have not yet cleared your account). 
    • Be aware that most financial institutions will exercise their setoff rights under § 553 of the Bankruptcy Code and may consider themselves "custodians" under § 543 of any money in the account. A right of setoff, or offset, allows a creditor, like a bank or credit union, to take money that the creditor owes a debtor (e.g., a checking or savings account) to pay a debt owed by the debtor to the creditor (e.g., a loan or line of credit). After receiving notice of a bankruptcy, for example, Wells Fargo Bank is notorious for putting an “administrative freeze” on financial accounts—even if the accounts are jointly held with a non-debtor and even if the bank has no claim to offset—until there is a determination about whether the money in its possession is property of the estate that should be turned over to the trustee and used to pay creditors.
  • What wages, vacation pay or other earnings were you owed as of the petition date that had not been paid before filing? The trustee will want to see copies of one or two pay stubs received immediately after the petition date. A legible copy of every pay stub received during the 7 months before the petition date must have been given to your attorney at or before the signing appointment.
  • Are there any tax returns that have not been filed? Are there any tax refunds or rebates owed or anticipated that you have not yet received? If you recently have received a tax refund or rebate, when did you receive it and what did you do with it? Copies for the trustee of the most recently filed federal and state tax returns must be given to your attorney no later than 2 weeks before the 341 meeting, if not provided before the petition date.
If you have any questions or concerns about any of these matters, you should discuss them with your attorney as soon as possible. Some things cannot be undone once the case has been filed or certain deadlines have passed.