When a person has realized, I need to file bankruptcy, more than likely he has entered a state of economic crisis where something needs to be done or he's going to lose everything. The first thing to consider, of course, is what to do first.
First Things First
The first step following your decision to move forward with bankruptcy is to file a petition with the Bankruptcy Court. On this petition, you list all of your debts and assets (property). This is followed by a list of schedules that list certain types of assets as well as your liabilities.
Steps to Filing Bankruptcy
The following are steps that can be followed to help you get underway in this momentous decision:
- Do you research and be certain that there is no other solution to you financial troubles other than bankruptcy. Generally before a person can file for bankruptcy, he must take some consumer credit counseling from an organization approved by the U.S. Trustee which must occur some 180 days before being allowed to file bankruptcy (with the intent is to provide debtors with alternatives prior to filing for bankruptcy).
- There are two types of bankruptcy for most individuals: Chapter 7 (the most popular) and Chapter 13 (more of a payment restructuring). You need to determine which is the correct chapter for you to file based on your circumstances. Chapter 7 has become more difficult to obtain because of the means test, which is intended to weed out those who have more income and assets but wish to simply have a lot if not all of their debt discharged.
- Make a clear decision about whether to use a bankruptcy attorney or not. Some feel they are an extra expense they can't afford on top of the bankruptcy. Others discover that having someone to ensure that all is filed correctly saves them more in the long run and keeps them from having their case dismissed. The lawyer can also assist you in filing for the right chapter for your situation. He can also help you when you are completing the BAPCPA's means test.
- Discover how much bankruptcy will cost you. Filing fees vary, so find this out for your jurisdiction before moving too far ahead. As for lawyers, some sill charge a flat fee while others will base their pay upon the amount of debt that you have. Some will ask for the money up front while others will wait for the successful outcome. In either case, always refer all your creditors to your lawyer once you have retained one.
- Attend the meeting of creditors, also called the "341 meeting" taken from the section of the Bankruptcy Code which requires this meeting. After your lawyer submits the petition, you are notified by mail of the date of this meeting. The wait time allows the trustee to research the veracity of your answers and that you now fully understand and agree to what you will be doing by filing bankruptcy. Ideally, you will have counseled with your lawyer prior to the meeting to review all your debt and ensure that everything was listed, as well as all of your assets. Go over possible questions you will be asked and be sure you know and understand your file for during the meeting you will be sworn under oath and your answers will be recorded.
- From this point forward, the trustee will decide what assets need to be liquefied to pay creditors, what will be exempt and what the final outcome will be. The initial intent of the bankruptcy proceedings is to allow you a new financial start. With this in mind, bankruptcy doesn’t mean you will lose all that you have, but it will attempt to pay your creditors and get you back on your feet.
Filing bankruptcy is a huge step and one that shouldn't be taken lightly. It also shouldn't be taken without help from a legal expert. A qualified bankruptcy attorney can help you with every step of the process and keep you from making mistakes that could ultimately result in your case being dismissed.