How to file for bankruptcy as an individual debtor

Bankruptcy is an effective - yet drastic - way to shield you from your creditors. The proceedings are governed by federal law and are designed to give you a fresh financial start. In October 2005, the U.S. Congress overhauled the U.S. Bankruptcy Code, making it far more difficult to file bankruptcy.

Instructions

Difficulty: Moderately Easy

Things You’ll Need:

• Past due bills, tax returns, paycheck stubs
• Bank statements
• Bankruptcy attorney, also known as a debt relief agent
• Money to pay your lawyer and court costs

1. Contact a reputable bankruptcy attorney. Suggestions for finding an experienced bankruptcy lawyer include contacting your local or state bar associations for referrals or asking friends or co-workers if they know a trustworthy attorney with bankruptcy experience.
2. Take all your financial papers including outstanding bills, bank statements,paycheck stubs from the most recent six months, copies of mortgages and car loans and tax returns to your first meeting with your attorney.
3. Your bankruptcy paperwork, called a petition, must list every debt you owe. If you don't list any creditors and the Bankruptcy Court finds out, it can dismiss your case and your bankruptcy is over. It is also a federal crime to lie on your bankruptcy paperwork. Debtors found guilty of lying in their petition can be fined or even sent to jail.
4. Discuss your "secured" and "unsecured" debts with your attorney. Secured debts are those like cars and mortgages where creditors hold a security interest in the property until the debt is paid. If the debtor does not pay the debt, the creditor can reclaim the property. Loans on collateral work the same way. Unsecured debts are debts not secured by property, such as most credit cards or medical bills.
5. Ask your lawyer if any of your debts will survive your bankruptcy or if they will be discharged, meaning you won't have to pay them after your bankruptcy is over. Debts that are extremely difficult to get discharged by bankruptcy include delinquent taxes, student loans and child support.
6. Tell your attorney about all the income you earned the last six months. That includes any bonuses or other one-time payments you generated. If you don't, and the Bankruptcy Court finds out, your case will be dismissed and you could be charged with perjury. The amount of your income will impact the chapter of bankruptcy you are entitled to file.
7. Depending on the types and amounts of your debts, determine if you can and should file a Chapter 7 (also known as a Liquidation Bankruptcy) or a Chapter 13 (Adjustment of Debts) petition. You may choose Chapter 13 if you earn a regular income and are behind on your secured debts, like your house mortgage, because a Chapter 13 is designed to help you catch up on those payments.
8. When your bankruptcy petition is completed and you have reviewed it carefully with your lawyer, you will sign the petition in numerous places, verifying the information is true. After that, your attorney will file your case electronically, meaning online, with the bankruptcy court that oversees your district. If you don't have an attorney, you will have to file your bankruptcy either in person or via U.S. Mail with the appropriate bankruptcy court.
9. Your creditors will be notified of your bankruptcy filing since the Bankruptcy Court sends each one a document called a Notice of Commencement.
10. One of the major benefits of filing any chapter of bankruptcy is the "Automatic Stay" that goes into effect as soon as your petition is filed. An automatic stay means your creditors have to stop all collection efforts after they are notified of the bankruptcy filing.
    
    Since it takes some time for the bankruptcy court to send the Notice of Commencement to your creditors, if one of them calls you about your debt with them, after you have filed bankruptcy, simply give them your bankruptcy case number and date of filing. Doing so gives them notice of the filing and notice is what makes the automatic stay effective.
    
    However, among the major changes enacted in the bankruptcy code is that if a debtor had a prior bankruptcy filing dismissed within too close of a time to your current filing, you might not get an automatic stay.
11. When a Chapter 7 bankruptcy is filed, the bankruptcy system assigns someone called a Trustee to your case. This person represents the interests of the U.S. Bankruptcy Court. They have several responsibilties. Among them is to ensure you, as the debtor, were honest in completing your bankruptcy petition and signed it with full understanding of what you were doing. They also collect and sell your assets beyond what the bankruptcy code allows you to keep and then distributes monies raised from those sales to your creditors. However, if the Trustee declares you to have a "no asset" case, it means you can keep all of your assets and won't have to surrender anything to the Bankruptcy Court.
12. Ask your attorney which "exemptions" apply to your case. Exemptions are allowances to keep some of your assets so you won't have to surrender every last item you own just because you filed for bankruptcy. Exemptions differ in every state and some states don't even have their own exemptions. In those states, the federal exemptions apply.
13. After your bankruptcy is filed, you (and your lawyer, if you hired one) will have to attend a Meeting of Creditors. Assuming that your court hearing goes smoothly and you comply with additional bankruptcy rules as they arise throughout your case, a Bankruptcy Judge will issue you a discharge.

Tips & Warnings

• Though the U.S. Bankruptcy Code is federal, various aspects of the bankruptcy proceeding vary from state to state.
• Ask your attorney to re-explain any terms of the Bankruptcy Code that are confusing to you.
• After your bankruptcy is discharged, you will not be able to receive another discharge for several years. The amount of time you can't file again depends on the chapter of bankruptcy your discharge stems from. For example, if you earned a discharge to a Chapter Seven filing, you can't get another Chapter Seven discharge for eight years.
• Filing for bankruptcy will negatively impact your credit record. However, having a boatload of overdue debts isn't good for your credit record, either. At least by filing bankruptcy, you are trying to make a positive change in the situation.