A Guide to Bankruptcy Filing

Even if you are a responsible person that tries to take care of their financial welfare, sometimes life simply gets out of control. Whether it is unexpectedly losing your job with no backup plan or making a bad investment that ends up putting you in an extremely bad financial situation, there are a countless number of events that can put your financial welfare into jeopardy. While some skeptics may view declaring bankruptcy as an easy way for irresponsible people to get out of paying their bills, in reality, it is a way for people who are in an impossible financial situation to get a second chance at life. If your credit and financial status is beyond repair, you may need to file for bankruptcy. Whether you are at the end of the road when it comes to financial options or simply want to know what is available to you, this guide will provide you with an overview of how to file for bankruptcy.

Review all Other Available Options

Filing for bankruptcy is far from being a get out of jail free card. When you declare bankruptcy, it will have a major impact on your credit for up to ten years. Therefore, the decision to file for bankruptcy is not one that should be taken lightly. Before you begin the process of filing for bankruptcy, you should ensure that there are no other available avenues for you to pursue to take care of your financial problems. If you have not met with a financial planner or credit advisor, be sure to seek their advice before you decide that your only option is filing for bankruptcy.

Obtain Approved Credit Counseling

If you have exhausted all of your other options and have come to the conclusion that filing for bankruptcy is the last option you have, before you can begin the process of actually filing for bankruptcy, you are required by law to meet with a credit counselor that has been approved by a US Trustee. Even if you have sought the advice of other qualified financial professionals (as recommended in the section above), you will most likely still need to meet with an additional credit counselor. Keep in mind that this meeting must take place within one hundred and eighty days of when you file for bankruptcy.

Look at the Two Types of Bankruptcy

When it comes to actually filing for bankruptcy, there are two routes that you can follow. The first type of bankruptcy is known as Chapter Seven bankruptcy. This form of bankruptcy is a liquidation (also known as straight bankruptcy). In order to file for this form of bankruptcy, you will need to pass a means test, which will determine whether or not you are qualified to file for a Chapter 7 bankruptcy (this test is used by the US Trustee to weed out fraudulent claims).

If you don’t qualify for Chapter 7 bankruptcy (or choose not to file for this type of bankruptcy), you will end up filing a Chapter 13 bankruptcy. Instead of being a liquidation, a Chapter 13 bankruptcy involves reorganizing your finances and setting up a plan that will allow you to repay your creditors. This type of bankruptcy allows you to rebuild your financial health without liquidating all of your assets.

Find a Lawyer to Help You File Bankruptcy

Although it is possible to go through the process of filing for bankruptcy without a lawyer, bankruptcy can be an extremely complicated issue to deal with, so it is highly recommended that you seek the help of a lawyer. In addition to finding a lawyer that has experience dealing with bankruptcy courts, you will want to choose a lawyer that you are comfortable around. If you have any reservations after meeting with a potential lawyer, keep in mind that there are a countless number of qualified lawyers that can help you file for bankruptcy, so you should not feel obligated to work with one that does not make you feel comfortable.

In addition to feeling comfortable with your lawyer, you should be aware of any and all fees that they will be charging you. The average fee for bankruptcy lawyers is around two thousand dollars, but there are quite a few other factors to consider (such as whether or not a deposit is required, how long you will have to pay off your legal bill, etc). If you are thinking strongly about hiring a lawyer, make sure that you get a written copy of what they are going to charge for their services.

Prepare for Your Meeting of Creditors

Once you have enlisted the help of a lawyer, you will be able to begin referring your creditors to your lawyer. After you refer a creditor to your lawyer, there is no reason for them to continue contacting you. If you continue to be contacted by a creditor, inform your lawyer immediately, as they may be able to pursue legal action against this creditor.

Your lawyer will arrange a meeting with all of your creditors. Prior to this meeting, it is important that you sit down with your lawyer and provide them with an honest look at your full financial situation. If you are filing a Chapter 7 bankruptcy, your lawyer will also look at whether or not your assets are exempt from being liquidated.

Finish the Process of Declaring Bankruptcy

When your meeting of creditors occurs, you will be sworn in and all your answers will go on record. Once your meeting is over, depending on the type of bankruptcy you filed, the court will either decide if any of your assets will be liquidated (Chapter 7) or setup a three to five year repayment plan (Chapter 13).

If your creditors do not challenge any portion of your bankruptcy filing within sixty days of your meeting of creditors, all of your qualified debts will be discharged (remember, debts such as student loans and taxes are not eligible to be discharged).

For more information on finance related issues, read How To File For Bankruptcy and Bad Credit Small Business Loans.


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