Process of Filing for Bankruptcy
The legal process of filing for bankruptcy must be undertaken with great care. One mistake may affect your right to file another case or loss of financial protection. Hiring an experienced bankruptcy attorney will ensure successful completion of the process. Bankruptcy fraud is a crime, and individual cases are randomly audited for completeness and accuracy of information. Of the two main types of bankruptcy, Chapter 7, known as a straight bankruptcy, allows you a fresh financial start by eliminating most or all of your debt. Chapter 13, known as a reorganization bankruptcy, allows you to create a three- to five-year debt repayment plan.
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Instructions
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Filing Chapter 7
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Obtain credit counseling during the six-month period prior to filing for bankruptcy. In 2005, changes were made to the United States Bankruptcy Code, making this a mandatory requirement. Without a certificate from an approved credit counseling agency, your case will likely be dismissed.
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Submit a petition and financial information, including your most recent tax return, to your local bankruptcy court to receive a case number. You must turn over all non-exempt property (that which can be sold to pay creditors) to a court-appointed bankruptcy trustee, who will be in charge of selling off your assets and distributing the proceeds to your creditors. An automatic stay will go into effect, preventing your creditors from taking further collection actions.
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Attend the 341(a) Meeting, in which you meet with your creditors. The court requires you to attend this meeting to allow your creditors to learn more about your financial situation in a non-confrontational manner.
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Wait for the court's decision regarding your eligibility for Chapter 7 protection. You may have to give up any property with an outstanding secured loan, such as your house or car.
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Take a financial management course. You will typically be required to attend two hours of classes and submit a certificate of completion to the court to receive your discharge or bankruptcy protection. Courses can be taken online or over the phone and cost approximately $19 to $50 as of October 2010.
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Go to the final hearing to find out if your discharge has been granted.
Filing Chapter 13
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Obtain mandatory credit counseling. Just as with Chapter 7, this must be done before you can file. A credit counseling certificate and any payment plan must be submitted to the court.
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File your petition, tax returns for the previous four years, a statement of financial affairs and your repayment plan. Your payment plan must include the term length (36 or 60 months), amount to be paid out over the specified term and a list of creditors that must be paid 100 percent (alimony, child support, back taxes or mortgage arrearages).
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Attend a mandatory meeting with the trustee. She will examine your information and ensure that your plan's monthly payment amount is high enough to benefit your creditors. After your meeting with the trustee, the court will have a hearing to confirm your plan.
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Make the monthly payments as proposed in your plan. The first payment is due 30 days after your case if filed, and if you miss any payments prior to confirmation of your plan, your case will be dismissed. Continue to make the payments for the duration of your plan term, and your discharge will be processed once your final payment is made.
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References
Resources
- Photo Credit Bankrupt. Businessman with empty pockets (with clipping paths) . image by Vitaliy Pakhnyushchyy from Fotolia.com
