Filing for bankruptcy may turn into the challenging and stressful process and therefore many rely on attorney’s expertise in order to increase chances of success. Services of an attorney may cost you unexpectedly much, besides, there is nothing complicated in filing for bankruptcy, especially if you have all the knowledge about each step of the process.
First of all, you need to evaluate your financial situation thoroughly to make sure that bankruptcy is really your best solution. As you know, along with bringing debt relief, bankruptcy brings some complications to one’s life and you have to be ready to face inevitable consequences as well.
Anyway, if you have decided to get rid of your debt burden through bankruptcy, here is the guide on how to accomplish your mission and avoid mistakes. Take a note, that in a case of your petition is rejected even due to a simple mistake in calculations; you will be restricted from filing for bankruptcy again in the next 6-8 months.
Steps to take for filing for bankruptcy
1. Collect all financial information about your income, loans, and property you own. 200
- Calculate your income.
You will need to calculate the income received from all sourced for the previous six months. You should include all your earnings with mentioning the employers who paid you the money. Make sure you do not skip (intentionally or unintentionally) any income as if this will be found you will be accused of providing fraudulent information.
- List all your loans
You must list every loan with interest rate, the creditors, the total amount of your monthly payment and all penalties (if any) for loans repayment delay. If you have any cosigner – you should mention him/her too. (For example, it can be your friend or a member of the family).
- List the assets and property you own.
You should list everything you own or co-own: your house, car, equities, boat, etc. You should not try to hide any of your assets as it will lead to serious troubles. If you file for Chapter 7 you may not mention your personal belongings like clothing or other necessities which is “exempt” property according to the Bankruptcy Code.
- Calculate your expenses.
You make a list of your regular expenses. Your monthly expenses may include medical bills, utility bills, food, rent payment, taxes, child support (if any), and transportation and clothing expenses and so on.
2. Pick the right bankruptcy Chapter
This step may seem tricky as almost everyone wish to file for Chapter 7 as it brings immediate and total debt discharge. However, not everyone qualifies for Chapter 7 and you know the parameters to figure out whether you match it or not.
These parameters are:
- The total amount of debt compared to the debt ceiling allowed under each Chapter.
- Your total income for preceding six months. If your income is high enough to repay even a fracture of your debt you will be offered to file for Chapter 13.
- If you have a family farm business or fishery – you are advised to file under Chapter 12.
- Chapters 11 and 9 are mostly for business owners who face financial hardship.
3. Fill in all the forms
All the forms and a Means Test you will find at http://www.uscourts.gov/forms/bankruptcy-forms including the form for making debt reorganization plan (for example for filing under Chapter 13).
Make sure you fill in the forms with the highest accuracy, as the single mistake may lead to petition rejection. Take a note, that in a case of petition rejection, the court fee will not be returned to an applicant.
4. Find out what types of your property are exempt and non-exempt
At this stage, it may be wise to ask a lawyer for his professional service, as depending on his skills the debtor can save a lion part of his possessions (if the lawyer will be able to prove to the court this property is your daily necessity). Anyway, the standard list of exempt property is: clothing, some furniture and mobile devices, a cheap car (normally under 3K$) and some other stuff. Your non-exempt property will be sold out by the Trustee in favor of creditors.
5. You must undergo credit counseling
Despite you are filing for bankruptcy without the help of an attorney, you will still need to undergo professional non-profit credit agency counseling. After they give a positive official conclusion, you may send your petition to the court (not earlier than six months after the counseling).
This pre-bankruptcy consultation could be received only from the agency approved by the Trustee.
6. Attend the meeting with creditors
Your Trustee appointed to you by the U.S Court will arrange a meeting of creditors before the final decision. In case you are filing under Chapter 7, the agreement between you and creditors means automatic petition approval. Creditors will ask you some question (formal ones) and you will get a title of a bankrupt.
In a case of Chapter 13, you will have to provide creditors with professionally developed debt reorganization plan, where you will show them how and in which way you are going to repay the debt within the next 3-5 years. If creditors find your plan suitable, you will get your debt relief which means you will still have to repay your debt, but with the significantly lower interest rate.
7. Get your petition approval and start a new life
Since your petition is approved, all creditors and collectors are prohibited from taking any action and disturbing you about the debt. Now you get full protection from the Government and a change to start your life from the blank sheet.
You will definitely face some complications in terms of getting a good job or new loans (since the information about your bankruptcy goes public). Your bankruptcy may even withdraw you from the normal social life, but all this is temporary. Soon you will get back on track with the much wiser approach to money.