When you are at the lowest point in your financial situation and you see no way out, filing for bankruptcy might be your safest option. Bankruptcy allows you to discharge or pay off your debts, depending on which bankruptcy option you choose. Filing for bankruptcy can be scary and stressful, but it doesn’t have to be.
In most cases, the most stressful part is the stage where you were trying to figure out how to solve the financial mess that you were in. Once you have decided to file for bankruptcy, all you need to do is look for a bankruptcy attorney and follow these steps.
1. Gather all your financial documents.
The first step that you must take is to gather all your documents so that you will have an accurate overview of the state that you are in. Get a free copy of your credit report. Take note that not all debts will be reflected in your credit report. Medical bills, payday loans, personal loans, and tax debts might not be listed in your credit report.
List down all your debts. You will need it when you fill out your bankruptcy forms.
Additional documents that you will need will include:
- Tax returns for the last two years
- Proof of income for the last six months
- Recent bank account statements
- Recent retirement accounts
- Appraisals of your real estate properties
- Vehicle registration copies
- Documents relating to your income, assets, and debts
2. Attend credit counseling.
When you file for bankruptcy, either Chapter 7 or 13, you will be required to attend credit counseling for six months before your petition is filed at court. You must take the course from a credit counseling agency approved by the Department of Justice.
The course is at least one hour, and you can complete it online or by telephone.
Credit counseling courses will also guide you on what you need to file for bankruptcy or if you can apply for an informal repayment plan instead. Courses can cost you $10 to $50. You will receive a certificate of completion when you finish the course. You will need to submit a copy of this certificate when you file your bankruptcy forms at court.
3. Find a bankruptcy attorney.
You will need a bankruptcy attorney when you file for bankruptcy. An experienced bankruptcy attorney can help you through the process. Filing for bankruptcy is not a DIY process. Laws can be complicated, and you do not want to make the mistake of jeopardizing your bankruptcy filing.
Your bankruptcy attorney should be able to help you in which bankruptcy filing suits your situation: Chapter 7 or Chapter 13. He or she should be able to present to you the possible options that you can take.
You should also look into the attorney’s credentials and records. How long has he or she been working as a bankruptcy lawyer? You will feel more confident if you work with an attorney who’s had vast experience. A lawyer who has been in the field for more than 10 years has been around long enough to know every possible issue that you might face.
4. Complete and file your paperwork.
You will need to fill up at least 23 separate forms when you file for bankruptcy. Your documentation will be around 70 pages. Your lawyer will fill up these forms based on the information that you have submitted in their office. In addition to the petition that your lawyer will submit, you will need to provide documentation for your debts, assets, and income, as discussed in step one.
Once your documents have been filed, an automatic stay will take effect. This means creditors cannot sue you nor contact you. Your home will not be foreclosed, and your car cannot be repossessed.
5. Pay for your filing fees.
You will be required to pay for charge case filing and other administrative fees. If you choose to pay this in installments, you have 120 days after filing to pay it in full. The fees that you need to pay will depend on the type of bankruptcy that you filed. The fees for each type of bankruptcy are as follows:
Chapter 7: $425 case filing fee plus $75 miscellaneous fees and $15 trustee surcharge
Chapter 13: $235 case filing fee plus $75 miscellaneous fees
6. The trustee takes over.
After you have filed your petition for bankruptcy, a trustee appointed by the court will manage and oversee the process. For Chapter 7 bankruptcies, the trustee will be in charge of liquidating your non-exempt assets. Your trustee will also ensure that you are aware of the consequences of bankruptcy and how it will affect your credit reports.
7. Meet with your creditors.
You will meet with your creditors in your 341 meeting. It is usually scheduled one month after you filed for bankruptcy. In the 341 meeting, your trustee will verify your identity and ask you a set of standard questions. Your creditors are allowed to ask you questions as well. You will mostly be questioned about your bankruptcy forms and your current finances.
8. Your eligibility will be determined.
The court will decide if you require bankruptcy protection based on what you have submitted. If the court determines that you qualify, your case will proceed in court.
Filing for bankruptcy can be time-consuming, but it does not need to be overwhelming. With the help of an experienced attorney, the process can be easier and less stressful for you.