When you have reached the end of your ropes and are hanging on by a thread, the only lifeline you may have left is learning how to file for bankruptcy. The process is not complicated, but many people have no idea what to do or how to even begin. Here are the steps to take to get the relief you need:
How to File for Bankruptcy
1. Explore every other alternative, and try to negotiate with your creditors before you take this big step. Bankruptcy stays on your credit for ten years, but your credit condition may be poor already in light of your financial situation.
2. The recent bankruptcy court amendments in 2005 made mandatory consumer credit counseling, prior to filing a bankruptcy case. These counselors can help you make a budget, negotiate with creditors, and point out any other options you might have short of bankruptcy.
3. Decide which of the two types of personal bankruptcy fits your situation. Chapter 7 is a liquidation bankruptcy, which means your assets are sold and the proceeds divided among your creditors. Chapter 13 is a modified repayment plan of your debts. Bankruptcy court changes have made it much more difficult to file a Chapter 7 bankruptcy, and many people will have to file a Chapter 13 due to the means testing ratios.
4. Research attorneys and ask friends and family for referrals if you don’t know a good one. Filing without an attorney is allowed, however the paperwork is tremendous and is best left to someone who has more experience if possible. When deciding on a lawyer, try to find one where you deal directly with the attorney and not with paralegals. Check out the costs at this juncture as well. Fees for filing vary widely, but you want an attorney that will charge a flat fee so that the amount will not unexpectedly change. The average attorney fee is around $1500-1800, depending on the area where you live. In a Chapter 13 bankruptcy, the attorney’s fees can be included and paid out of the proceeds of the plan, but with Chapter 7, the attorney must be paid in full before filing.
5. Meet with your attorney and go over the details of your case. Make sure you get all questions you have answered, and he should have a lengthy list of questions for you to decide on Chapter 7 or 13. They will also make a list of all your assets, make sure all of your debts are included, and tell you what to expect in court.
6. Refer bill collectors from this point on to your lawyer. You’ve retained them for this purpose: to speak to creditors in your stead. Once filed, the bankruptcy protections go into effect, including the “automatic stay.” No creditors should contact you about your debt as it is illegal for them to do this, and violations can result in fines being assessed.
7. Wait for the creditors meeting. You will be notified of your court date for a meeting of your creditors (a 341 meeting, named after the Bankruptcy Code.) During this meeting the trustee will ask you questions to ascertain that you’ve answered the questions on your filing papers truthfully and that you understand the process. You’ll be sworn in, and will answer questions while being recorded. The meeting will only last about ten to fifteen minutes.
8. Do not run up your credit cards before you file for bankruptcy, as this is a huge red flag to the creditors and to the bankruptcy court. The creditors will dispute the discharge of those debts, so it probably will be of no benefit to you, as you’ll end up paying those debts anyway.
9. The trustee in Chapter 7 cases will decide which assets are to be liquidated. The trustee can determine that all of your assets are exempt; in which case he’ll return a report of no distribution, and you will keep your exempt assets. Chapter 13 bankruptcies are set up on repayment plans of three to five years; and you’ll be required to repay a percentage of your debt based on your ability to do so.
10. 60 days after your 341meeting is the deadline for creditors to challenge any part of the claim, and if no challenges are made, you will soon receive a formal discharge from the bankruptcy court in the event of a Chapter 7 bankruptcy, and are not obligated to repay those debts. In Chapter 13 cases, your case will be discharged after your final payments have been made to the trustee at the end of your court-ordered repayment plan. Keep in mind that certain debts, like those owed to the federal government, are not dischargeable in a bankruptcy case.
People of all economic classes file for bankruptcy, and as the economy has weakened, bankruptcy filings have increased tremendously. Do not be ashamed to ask for the protection of the court when you cannot manage on your own.
This information was correct at the time of writing. Always check with a legal professional. Copywrite www.bankruptcy-aid.com
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