How to Understand Bankruptcy Filing Requirements

Filing for bankruptcy should always be an option of last resort. Bankruptcies will remain on your credit report for 7 to 10 years and will prevent you from getting good interest rates on home or car loans. The bankruptcy filing requirements changed in 2005 with the passing of the Bankruptcy Abuse Prevention and Consumer Protection Act.

Instructions

Difficulty: Challenging

Things You’ll Need:

• Credit and debt counseling
• Two years residency

1. Know the new limits to Chapter 7 Bankruptcy. This chapter of bankruptcy is filed when you are requesting the dissolution of all of your debts. The debts included in Chapter 7 are limited to unsecured loans and credit cards.
2. Identify what income qualifiers pertain to Chapter 7 Bankruptcy. The court will request your total income and total expenses; this is called a Means Test. If it is determined that you can pay these debts without causing undue financial strain or hardship, the court will convert the Chapter 7 filing to a Chapter 13 filing.
3. Understand the requirements to file Chapter 13 Bankruptcy. This type of bankruptcy involves paying back your debt over time. To file for Chapter 13, you must meet certain requirements such as proof that your income exceeds your expenses, have both unsecured debts and secured debts below the allowable ceilings.
4. Identify your responsibilities before filing for any form of bankruptcy. You must receive credit and debt counseling from a court-approved credit counseling agency within six months before you file your bankruptcy petition.

Tips & Warnings

• Be sure to consider every other option before filing for bankruptcy. Creditors will often negotiate your payments or interest rates or consider seeing a credit counseling agency on your own in an effort to avoid filing for bankruptcy.
• Hire a bankruptcy lawyer. The new bankruptcy laws are complicated and lawyers are required to take classes regarding these laws.
• Attend credit counseling as soon as possible. You will not be able to even submit a petition for bankruptcy if you do not have a certificate or some sort of confirmation that you have completed credit counseling.
• Check the residency restrictions. You must have lived in the state in which you are filing for bankruptcy for at least two years before you can file a petition with the court. If you haven't lived in your state for that long, you must wait.