Filing Chapter 7 Bankruptcy: Plan Ahead

Filing Chapter 7 bankruptcy gives a debtor a fresh start by eradicating all his debts. However, this particular type of bankruptcy involves liquidation of all of the debtor’s non-exempt assets, wherein the proceeds will be distributed among his creditors. Apart from that, it also damages one’s credit rating for up to 10 years. Before you file for this type of bankruptcy, it is crucial to plan and prepare so you can go through the process with little or no problems.

Gather Necessary Documents

Before filing for Chapter 7 or any other type of bankruptcy, you must gather all the necessary documents required such as current bills, financial statements, paystubs, recent tax return, and schedule of assets. You will also need to create a list of everything you owe including the name and details of creditors as well as your balance due, interest rates, and minimum monthly payments. These documents are important so that the court can determine your income, debts, and creditors. You will also be required to fill up a bankruptcy application form, which will serve as the petition that you will file in front of the bankruptcy court in your state. Remember that all the information you disclose should be honest and accurate. Omission and falsification of details are subject to penalties and punishments by the court.

Know the Process

Planning for Chapter 7 involves studying and understanding of the process. First comes the official petition, in which you will provide the court with all the necessary documents mentioned above. Then there will be an automatic state, which will render it illegal for creditors or collection agencies to collect debt payments or seize your properties. After that, you have to hand over to the court-appointed trusted all your properties that are non-exempt. A month after the filing, there will be a meeting between the creditors and debtor. This is called the 341 hearing. Discharge as per order of the court will clear the debts within 60 days.

Hire a Lawyer

Getting professional legal service is an important step in preparing for your Chapter 7 bankruptcy. This is because bankruptcy, whatever type it may be, is always complex and stringent. For this reason, it would help you a lot if you have a reputable and efficient lawyer to guide you through the whole process.

Once you are given a fresh start with a Chapter 7 bankruptcy, make sure to use the opportunity to do much better in your financial management so you do not fall into the same trap all over again.