How to File Bankruptcy
So you are wondering how to file bankruptcy.
Filing for bankruptcy is a very difficult decision that many Americans will face at some time in their lives. Learning how to file bankruptcy should not be your first choice in managing overwhelming debt, but only used if all other avenues of debt repayment have been exhausted.
The Reality of Bankruptcy
It is important to first understand that bankruptcy stays on your credit report for 10 years, which essentially means that obtaining credit of any kind during that time could be extremely difficult or downright impossible. Therefore, it is important to first explore other methods of repayment.
Steps on How to File Bankruptcy
However, if your debt is crushing and your options are limited, you may consider filing for bankruptcy. The following steps outline how to file bankruptcy:
- Educate yourself on the current U.S. bankruptcy codes. It is important to recognize that as of 2005, the U.S. Bankruptcy Codes changed, making it harder for individuals to file Chapter 7 bankruptcy. Chapter 7 bankruptcy is a liquidation of debt, while Chapter 13 involves repaying the debt over a period of three to five years.
- Hire a competent attorney skilled in bankruptcy law. This may include researching attorneys in your area, asking for referrals from friends, family and business associates, and comparing fees between attorneys. Some bankruptcy lawyers charge a flat fee for bankruptcy filing, while others charge fees based upon the amount of debt you have. In addition to the attorney’s fees, you will also need to pay certain filing fees related to your bankruptcy case.
You may want to ask if your attorney requests an upfront fee, or if he or she will accept payment installments.
- To fully understand how to file bankruptcy, you should also obtain credit counseling services. Under the new U.S. Bankruptcy codes, all individuals filing for bankruptcy must obtain the services of a court-approved credit counseling company within 180 days of filing for bankruptcy.
- Review your case with your lawyer and determine which type of bankruptcy you intend to seek. The U.S. Bankruptcy Abuse Prevention and Consumer Prevention Act of 2005 requires that individuals seeking bankruptcy protection complete a “means” test, which is then used by the bankruptcy courts to determine under which type of bankruptcy (Chapter 7 or Chapter 13) you may file. Your bankruptcy attorney should help you complete this test.
- Prepare for your meeting with creditors. After your bankruptcy attorney has filed a petition on your behalf, the court will arrange a meeting between you, your attorney and your creditors. It is during this meeting that your attorney must present a list of all your debts and assets. Your answers will be recorded during this meeting, and you must be sworn in to tell the truth as well. If you are filing for Chapter 7, it will also be a time when the court will determine if you have any assets which can be sold to repay your creditors.
- Enjoy the peace during your “automatic stay.” The automatic stay, which begins after the petition is submitted by your attorney, prevents creditors from contacting you about your debt. The creditors are bound by law to adhere to the automatic stay. Your bankruptcy attorney, however, will likely field phone calls from creditors.
- Wait 60 days for your bankruptcy filing to become valid. Creditors, during this time, can file lawsuits if they contest the bankruptcy.
By taking these steps, you will not only know how to file bankruptcy, but you can start over financially to begin rebuilding your credit once again.