What Do I Need to Know About Filing Bankruptcy?

Bankruptcy is a powerful legal tool that can cause favorable and unfavorable outcomes in your life. While you may emerge from a bankruptcy free from debt, you will carry the consequences of that freedom for years to come. When you file bankruptcy, not only does it cost money, but you have to appear publicly to discuss your case. If you do not follow all the requirements of bankruptcy procedure, the court may dismiss your case before discharge.

Bankruptcy Is a Public Record

Debtors typically have a sense of anxiety or shame over filing bankruptcy. If you are concerned at what people may think of you if you file bankruptcy, realize that a bankruptcy petition is a public court document. In addition to someone having the right to find out if you filed bankruptcy, he even has the right to look at your actual bankruptcy petition, in which you list your debts, assets and other personal financial information. Although someone usually needs to know where to look to find your bankruptcy documents, some newspapers routinely publish lists of debtors who file bankruptcy.

You Have to Appear at a Public Meeting

In addition to the public nature of your bankruptcy petition, the mandatory meeting of creditors is also a public event. Although most of the public in attendance at a meeting of creditors are other debtors, the general public is welcome to attend and listen in on the hearings. While the thought of answering financial questions, under oath, in front of strangers, while being recorded can be daunting, it is a necessary part of the bankruptcy process. Non-appearance at this meeting results in the dismissal of your bankruptcy case.

Bankruptcy Costs Money

While it may seem ironic, you need money to file bankruptcy. Even if you end up filing your case without an attorney, in a process known as pro se filing, you must still pay the bankruptcy filing fees. If you can file a case without any help at all, you can limit your costs to the $274 or $299 that standard Chapter 13 and Chapter 7 cases cost (as of March 2011). If you add an attorney, your cost typically starts around $750 and can run into the thousands of dollars.

Bankruptcy Carries Long-Term Consequences

While your bankruptcy case itself may end in as few as three or four months, in the case of a simple Chapter 7 bankruptcy, the effects can be long-lasting. The credit reporting bureau Experian notes that Chapter 7 bankruptcy shows on your credit report for 10 years, and the negative effects of that bankruptcy are substantial. During the entire 10 years of your post-filing life, you may have difficulty obtaining credit.

Bankruptcy Can Protect You

Filing a bankruptcy protection is ultimately all about protection. If creditors and debt collectors are after you, filing a petition immediately silences them by law. If you ultimately succeed in your case and earn a bankruptcy discharge, then their pursuit of you is officially over. By law, you no longer have to pay your debts. The power of this court order might be enough for you to consider bankruptcy, in spite of the negative aspects of the process.

References

• United States Courts: Discharge in Bankruptcy
• Bankruptcy In Brief: Going to Court
• Experian: Credit Advice -- Bankruptcy Has Greatest Effect on Scores, Collections A Close Second; Maxine Sweet; November 24, 2010
• Bankruptcy Law Network: How Much Does Filing For Bankruptcy Cost?; Karen Oakes; September 2010
• Bankruptcy Law Network: Documents You Need to Get Your Bankruptcy Case Started; Jonathan Ginsberg; January 2007
• Bankruptcy Law Network: Who Will Know About My Bankruptcy?; Rachel Lynn Foley; April 10, 2008