How to Plead Bankruptcy

Credit card

Bankruptcy laws give consumers a fresh start when they can no longer pay what they owe. Pleading bankruptcy is an option when all other attempts at making minimum payments to creditors have failed. Some reasons consumers file for bankruptcy include wage garnishment, excessive medical expenses, overextended credit lines and balances, and extended periods of unemployment. The most common types of bankruptcy actions are Chapter 7 and Chapter 13. Chapter 7 liquidates all assets and is used if most of your debt is unsecured and you have little or no money left after paying basic expenses each month. Chapter 13 adjusts your debt and is used if you have significant equity in a home or other property and you want to keep it. It also assumes you have enough income to pay for living expenses.

Things You'll Need

• Bankruptcy attorney or preparer
• Bankruptcy filing fees

Instructions

1. Consider consulting a consumer credit counseling agency. These agencies negotiate with creditors to lower minimum payments and balances. They also allow the consumer to make one payment that is disbursed by the counseling agency to creditors. This assures that payments are made on time. Most states require this as part of the bankruptcy process. Please keep in mind some of these agencies aren't looking out for you best interests and may end up costing more than they save. You can find a list of approved credit counseling agencies from the Office of the United States Trustee. You can also find reviews online for the best credit counseling services.

2. Call your creditors to negotiate settlements. A creditor may lower your balance under an agreement that payments are made in installments on a fixed schedule. This will show up on your consumer credit report as a settlement and it will not hurt your credit report. But this outcome falls short of that of a bankruptcy, and as part of the settlement your accounts will be closed.

3. File a bankruptcy petition. You can do this through a bankruptcy attorney or bankruptcy preparer.

4. Prepare a list of creditors. This list must contain the information from all of your creditors including mortgage holders, credit cards, car payments, revolving credit accounts and other creditors.

5. Prepare a schedule of assets and liabilities.

6. Obtain a copy of all pay stubs 60 days before filing bankruptcy.

7. Prepare a record of interest in any retirement savings accounts, including company 401k's and IRA's.

8. Prepare a list of current income and expenses. Itemize net income and expenses to show how they are calculated.

9. Prepare statements of intention regarding property that secures a debt. This includes automobiles, boats, property and homes.

10. Wait for your court date. At this time a judge or trustee will review your documents. Creditors will have a change to appeal any claims against them. If your claim is accepted the trustee will set a discharge date.

Tips & Warnings

• In some states you can file a bankruptcy petition without an attorney or preparer.

• You may need additional documents, depending on your state's requirements.

• The bankruptcy process varies in every state. Consult a bankruptcy attorney and/or review the laws in your state before moving forward with the bankruptcy process.

References

• Federal rules of bankruptcy procedure