Bankruptcy can be a tough and painful decision that no one wants to make. Unfortunately, thousands of people every year are faced with this difficult reality. Chapter 7 bankruptcy allows you to have your items of value sold to repay your creditors a portion of your debt. If there is any debt left you will no longer be responsible for it. This may be best for those who have little or no valuable items that they would like to keep. If you so have items of value that you want to keep, a Chapter 13 bankruptcy would be best. This bankruptcy allows you to come up with a payment timeline (up to 5 years) to pay off your creditors. If you are considering bankruptcy or just want to learn more on the subject, the steps outlined below will show you how to file for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
- First, try taking a look at alternatives to bankruptcy. This option should be used only as a last resort since it is such a major financial decision and can have major repercussions in your financial life. Your credit score could be permanently affected by it, and your ability to get credit and borrow money will be damaged. You may not be able to get any kind of credit for perhaps a decade. Don't declare bankruptcy until you've explored all options.
- Bankruptcy may not be a good option if a large portion of your debts are exempt from a bankruptcy discharge. This includes debts such as student loans and child support payments.
- If bankruptcy is your only hope, you will need to find a good bankruptcy lawyer to help you through this process. Not only will she be able to represent you in court, but she will also be able to offer sound legal advice as you make important decisions concerning your bankruptcy.
- You must complete a financial counseling class before you file for either Chapter 7 or Chapter 13 bankruptcy.
- Your lawyer will file your paperwork with the court. This will include descriptions and values of your assets, how much you owe creditors, and your current income.
- You and your lawyer should also file a document that explains to the court, and your creditors, how you plan to repay your debts and the estimated timeline to do so (Chapter 13 only).
- The court will let your creditors know that you have filed for Chapter 7 bankruptcy. From this time forward, creditors can no longer try to collect directly from you.
- 30 days after filing, your first Chapter 13 payment is due to the trustee (Chapter 13 only).
- The court will determine when your Section 341 meeting will take place.
- You must give the trustee your financial information so that he can make sure you qualify for Chapter 7 or Chapter 13 bankruptcy, and also to determine if there is any reason to deny your Chapter 7 bankruptcy claim or to ensure that he can approve your Chapter 13 bankruptcy claim. This must be done at least one week before your Section 341 meeting.
- You will meet with your creditors and the trustee at the courthouse for your Section 341 meeting. At this meeting the trustee and your creditors will ask you questions, under oath, about your current finances and future intentions.
- The court will determine when your approval hearing will take place (Chapter 13 only).
- You will attend your approval hearing to respond to any creditor objections or make any paycheck offset objections of your own (Chapter 13 only).
- Your non-exempt assets will be liquidated and sold to pay off a portion of your debts (Chapter 7 only).
- You must create a statement of intent to inform the court how you will pay off any secured debts that you have acquired (Chapter 7 only).
- All creditors with unsecured debts must have filed a claim within 90 days of your filing (Chapter 7 only).
- Your qualifying debts are discharged and no longer owed by you (Chapter 7 only).
- You will continue with your payment plan for the agreed-upon time frame (Chapter 13 only).
Assuming that you do not have additional court dates to defend your position against any of your creditors, this process should take a total of 90 days from when you first file.