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How to File for Bankruptcy
Filing for bankruptcy isn't a simple thing emotionally or mentally, but when you know what to expect it can make the process go much more smoothly. Bankruptcy is one of the most effective ways to protect yourself from the creditors that are hounding you, but it is a very drastic course of action to take. Bankruptcy is not for those that can pay off their debts but don't want to, bankruptcy is for those that have truly gotten in over their heads and can benefit from the bankruptcy proceedings that are governed by federal law and are meant to give those in need a fresh start.
Contact a Bankruptcy Attorney
One of the first things you will want to do is get in touch with a reputable bankruptcy attorney. Many of them have really affordable rates, or you can check with your local law school and see if you can get some free representation. Not only will the attorney be able to talk you through all the steps and what you should expect from the bankruptcy process, they can help you protect the things that you would like to keep out of the bankruptcy process. Bankruptcy is typically a very straight forward process, but because you've never done it before and it is a very stressful process, you'll want all of the help that you can get.
Financial Papers
Next, you'll want to bring all of your financial papers, bills, debts, bank statements, income verification, as well as proof of your tax filings for the last four years to your bankruptcy attorney. Together you can determine the true extent of your debt. Your attorney can also help you ensure that you are thinking of everything, because any debts that you omit from the filing process will still be owed by you after the bankruptcy proceedings.
Secured and Unsecured Debt
You'll want to discuss your secured and unsecured debt with your attorney. If you aren't sure what those debts are, your attorney will help you determine what is what. Typically, secured debts are those like vehicles and mortgages and unsecured debts are not secured to a property to object. Your attorney will be able to analyze all of your debts and help you determine what debts will still need to be paid after the bankruptcy is finalized. Debts that you will have to pay regardless of your bankruptcy are items such as taxes, student loans, child support, and alimony. You'll also want to be sure to report every dime that you earn to your bankruptcy attorney. If the court ever determines that you have not reported all of your income, your bankruptcy protection will be revoked, and you will be liable for all of your debts. It's better to be upfront than suffer a setback because you failed to report all of your income.
What Chapter to File
Next you'll need to determine whether you want to file for Chapter 7 bankruptcy which is also known as liquidation bankruptcy and all of your debts will be wiped away, or Chapter 13 which allows you to submit a repayment plan to protect your home, cars, and other valuable possessions. Once you decide what chapter you want to file under, you'll fill out the paper work, and your attorney will file the petition with the county clerk or right at the bankruptcy court. The filing usually costs about $300 or a little less to file, but your attorney may pay the charges and then deduct these charges from your retainer, if you have one.
Creditors
It's a good idea to notify all of the creditors that have been hassling you and even those that have not that you have filed for bankruptcy. This will allow you to have some peace before the filing is even official or before the bankruptcy is discharged. The automatic stay goes into effect as soon as you and your attorney file the petition for bankruptcy, so you do not have to take the calls of any creditors; in fact, creditors are not allowed to contact you at all in the attempt to collect debts. A trustee will be assigned to your case to contact creditors, determine what property can be sold, and distribute funds to the companies that you owe money to. If you have any liens, your property will likely be sold to satisfy them. This is where your bankruptcy attorney can come in very handy, as he or she can help you identify what property exemptions may apply to your case so that you don't lose your home, car, or other items that are important to you.
Court Hearing
You'll likely be required to attend a meeting or hearing with your creditors and the court. This will be a meeting in which the court asks if everything on your petition for bankruptcy is true, and creditors are invited to this meeting as well. It's important to have any issues clarified for you if you don't understand questions, comments, or proceedings. Your attorney can generally help you understand the process by telling you what will happen ahead of time so that you aren't left confused or stressed our during the meeting. If the meeting goes well, you'll receive a bankruptcy discharge in the very near future.
Bankruptcy Details
Remember that filing for bankruptcy is a federal process, but that little details may vary from state to state. It's also important for you to understand that bankruptcy is not supposed to be something that you look forward to doing, or an easy way out for debts that you could have handled. Because bankruptcy should be a last resort course of action, you will not be able to file for bankruptcy for another six to eight years from the date you file. Many courts will require that you receive budgeting classes to help you avoid drastic bankruptcy actions in the future. Hopefully one bankruptcy will be enough to give you a fresh start and get you back on your feet so that you don't have to worry about such overwhelming debts in the future.