Advice on How to File Bankruptcy
For people in adverse financial situations, a bankruptcy filing should always be the last resort. A record of bankruptcy stays on your credit report for ten years, affecting your financial credibility for quite some time. If you are considering bankruptcy, learn first if this option is right for you including how to file bankruptcy and make an informed decision.
Before you file a bankruptcy case, you are required by law to have a one-on-one session with a qualified credit counselor who will help you identify other options besides filing bankruptcy. If you must proceed, here are some things you need to know on how to file bankruptcy:
Bankruptcy is a legal proceeding that clears certain debt of an individual or business organization that is no longer capable of meeting financial obligations. For individuals, excluding farmers, the two types of bankruptcy that can be considered are chapter 7, in which the debtor’s assets are liquidated in order to repay credit and chapter 13, in which the debtor is given a fixed period of time to reorganize and repay his or her debt.
The new bankruptcy law requires individuals seeking to file under chapter 7 to undergo a means test, which will determine the person’s financial capability to repay debt. Debtors who file under Chapter 13 should have a regular source of income to be eligible.
Find out the specific conditions and requirements under each chapter so you can decide what is the most suitable in your situation. At this point, you may want to consider getting a lawyer who can provide assistance and knowledge on how to file bankruptcy.
When you draft and file a petition for bankruptcy, you must provide the bankruptcy court detailed information about your current income, expenses, assets and liabilities. Be accurate, thorough and completely honest when answering the forms to avoid delays or other serious consequences such as imprisonment. Be sure to include in the listing of debt all your existing debts. Official bankruptcy forms must be used in filing and they are available online or in stores selling legal stationery. Some forms even have self-help information on how to file bankruptcy.
The cost of filing a chapter 7 or chapter 13 bankruptcy petitions is more or less $200. Lawyer’s fees may range from $600 to $1200 depending on the type of bankruptcy.
After you or your lawyer has filed your petition, the next stage is called the “341 meeting”, where you will meet with the trustee and your creditors. Under oath, you will be asked simple questions to verify the information you have provided in your petition such as your assets and liabilities. After bankruptcy filing, your creditors may not continue to collect from you. You should be relieved from wage garnishment, eviction or foreclosure notices.
There are certainly a lot to consider on how to file bankruptcy but, most importantly, you have to consider if it’s the right choice and if you are willing to accept its consequences.