How To File for Bankruptcy

Before you contact a bankruptcy attorney, you might want to see whether it would be a good idea for you. There are Web sites that will let you plug in your particular information and help give you an idea of whether it will benefit you.

Before you meet with your attorney, you will need to gather ALL your financial data. Make sure you have a recent copy of a bill from every creditor - mortgages, vehicle loans, credit cards, and any other lenders. You will also need to have 6 - 12 months worth of income information. Pay stubs aren't the only piece of information needed here. If you get alimony or child support, or have a contract job or get money from ANY other source, you need to compile that information. Lest you be tempted to "forget" anything, if the bankruptcy court finds out about any missing information, either income or creditors, you could be charged with perjury and your case immediately dismissed.  

Based on your individual situation, you will need to choose whether to file for Chapter 13 or Chapter 7 Bankruptcy. Chapter 13 is commonly used if you have a job and are trying to pay your debts, and you just can't keep up. It will help you "re-work" your outstanding debts so that you can afford to make all the payments and have money left for food. A Chapter 7 Bankruptcy is more common for those who may have lost their jobs, or are so far behind that there is almost no hope of catching up. However, this is also called a Liquidation Bankruptcy and except for certain assets that are exempt, all other assets can be sold to cover your debts.  

Some in the past have been tempted to "hide" assets, or purchase exempt assets very close to bankruptcy to cheat the lenders out of their money. Again, the bankruptcy courts do not approve of such and you could find yourself in a fair amount of hot water. The courts will look at recent spending habits to see if you were trying to cheat the system. If they find evidence of possible fraud, they may decide to look a lot deeper to make sure that you aren't just trying to get out of paying any debts.  

Although it might be wise to work with a bankruptcy attorney, you aren't usually required to use one. You could choose to file the bankruptcy petition using an appropriate form and either file it by mail or at the appropriate court. Once your petition has been filed, the court will assign you a trustee. That person is responsible to make sure that you were honest and all your information and documents are in order. They will notify all your creditors as well.  

You will have to attend a Meeting of the Creditors at the Bankruptcy court. That will allow any creditor to raise an objection or provide additional information. Again, if you have provided all the information up front, this may be a very short meeting. Once you have completed your tasks, the trustee is finished with their portion and you have completed any other requirements that have come up during the process, the Bankruptcy Judge will issue you a discharge.

There are a couple of things to watch out for. Bankruptcy almost never eliminates debt like child support, back taxes, or student loans. You will usually still have to pay them when all is done. Also, bankruptcy will put a MAJOR dent in your credit score. Although it won't necessarily stop you from purchasing a house or a car down the road, you will usually pay higher interest rates at the very least.  

If you hear some "expert" promise to wipe away all your debts with no negative effect to you, they aren't being honest. So think through this decision carefully. Check your other options and see what makes the most sense for you before you commit to any! Now you know how to file for bankruptcy so you'll know if other options are better.