How to File for Bankruptcy?
Bankruptcy is an option that allows you to have debts forgiven or restructured legally. Someone who files for bankruptcy is given the protection of a federal court. It is an option that's to be used for overwhelming debt that a person has no reasonable way of paying off without legal protection and intervention.
A Look at the Two Main Types of Bankruptcy
There are two options to choose from when making the decision to file for bankruptcy. A person must decide if their circumstance is suitable for Chapter 7 bankruptcy or Chapter 13 bankruptcy. This decision will mark the first step in filing for bankruptcy.
Chapter 7 bankruptcy is liquidation. This is the more common of the two options. Things like credit card debt, personal loans, medical debt and other unsecured debts are forgiven under Chapter 7 bankruptcy.
Chapter 13 bankruptcy is reorganization. People who file for this type of bankruptcy typically repay a portion or all of their debt under the supervision of a court-approved plan. This is only an option if the ratio of debt to income falls under a certain level.
The Steps of Filing for Bankruptcy
It’s important to have an attorney in most cases when filing for bankruptcy. Many people are tempted to try to go through the process alone to avoid the need to pay attorney fees. However, the reality is that filing bankruptcy paperwork improperly can actually result in your case being thrown out. Here’s a quick rundown of what the filing process looks like:
- Obtain an attorney
- Gather all of the information needed to file
- Attend mandated pre-bankruptcy credit counseling
- Work with your lawyer to fill out paperwork, verify that all of your information is accurate and meet deadlines
- Work on and file a proposed payment plan if you’re seeking Chapter 13 protection
- Attend a mandated meeting of creditors
- Pay all filing fees
- Attend mandated pre-discharge credit counseling
Your attorney will take care of most of the paperwork needed to proceed. However, you will still play a large role in the process. It will be necessary for you to gather and provide many different pieces of information regarding your finances from recent years. This will include things like your income statements, debts, expenses, assets, liabilities and general financial history.
What Is Pre-Bankruptcy Credit Counseling?
Pre-bankruptcy credit counseling is an important step that is not to be missed during the process of filing for bankruptcy. This step is required whether you are filing for Chapter 7 bankruptcy or Chapter 13 bankruptcy. Counseling can be done online or by phone. However, you must be sure to receive your counseling through an agency that is approved by the United States Department of Justice. You can expect to pay up to $50 for this service. You will also have to complete what is known as pre-discharge counseling before your bankruptcy case officially comes to a close. This course must also be provided by an agency that is approved by the Department of Justice. The second portion of counseling will cost another $50 or more. More information on counseling can be found on the Department of Justice's website.
What Is the Cost to File for Bankruptcy?
The cost to file for Chapter 7 bankruptcy is $335. The cost to file for Chapter 13 bankruptcy is $310. It is sometimes possible to receive a fee waiver in certain cases.
What Happens Once You File?
The act of filing the petition for Chapter 7 bankruptcy or Chapter 13 bankruptcy will trigger an automatic stay. What does this mean? You will be protected from any attempts made by creditors to sue you, harass you regarding your debts or garnish your earnings.
What Is a Meeting of Creditors?
You aren’t necessarily done dealing with your creditors just because you’ve filed for bankruptcy. Attending a meeting of creditors is actually a requirement for both types of bankruptcy filings. This meeting is a time for the accuracy of your filing papers to be discussed. In addition, you may be asked to provide more information about any nonexempt assets that you might possess. It is likely that your case will be officially closed if this meeting ends without the need for any additional steps.
What Comes Next?
The closing of a bankruptcy case is really only the beginning in some ways. It will now officially be time to rebuild your financial life back up from square one. This can include creating a budget, seeking out companies that offer post-bankruptcy advising and diligently making any payments owed as part of a Chapter 13 structured payment plan.
How to File for Bankruptcy in Your State?
- New Hampshire
- New Jersey
- New Mexico
- New York
- North Carolina
- North Dakota
- Rhode Island
- South Carolina
- South Dakota
- Washington, D.C.
- West Virginia