How to File Bankruptcy

Sometimes bankruptcy is inevitable. You understand the consequences of filing bankruptcy and have decided that bankruptcy makes the most sense for your future. So, how do you go about taking the next step and filing for bankruptcy?

Consider Hiring an Attorney

Many people decide to hire a bankruptcy attorney prior to formally filing for bankruptcy. In most cases, this is an important step because an attorney can often produce more favorable results than you could achieve on your own. An attorney is particularly important if you are filing for Chapter 13 bankruptcy where a plan will need to be negotiated with your creditors.

Also, it is important to seek consumer credit counseling from an entity approved by the U.S. Trustee before filing for bankruptcy. Federal bankruptcy law requires bankruptcy petitioners to receive consumer credit counseling from an approved entity within 180 days of filing a bankruptcy petition. The consumer credit counseling will review alternatives to bankruptcy and consequences of bankruptcy with you.

Decide Whether You are Filing for Chapter 7 or Chapter 13 Protection

When you are ready to begin bankruptcy proceedings, you, in consultation with your attorney if you have hired one, will need to decide if you are filing for Chapter 7 or Chapter 13 bankruptcy protection. Chapter 13 bankruptcies establish a repayment plan with your creditors and Chapter 7 bankruptcies allow you to repay your debts through a liquidation of your assets.

Filing

After you have decided which Chapter of the Bankruptcy Code best meets your financial needs and long term goals, then you can file the requisite papers with the Bankruptcy Court. You should also be prepared to pay all applicable filing fees at this time.

Once you have officially filed your petition for bankruptcy with the court, all of creditors will be notified and an automatic stay goes into effect. This means that your creditors may not contact you regarding debt repayment. Instead, all discussions of satisfying existing debts will go through the court.

Creditor Meeting

You will be notified, either through your attorney or by mail, of the date for a meeting with all of your creditors. The meeting is usually not long but it is significant. The meeting will review the debts and assets listed in your bankruptcy proceeding to ensure that all of your declarations were truthful. The trustee running the meeting will also make sure that you understand the details and consequences of your bankruptcy petition.

Developing a Plan

The next step is to develop a plan to settle your debts. In a Chapter 7 case, the trustee will determine if you have any nonexempt assets that can be sold to satisfy your debts and will oversee the sale and distribution of funds from those assets. In a Chapter 13 case, you will enter a 3-5 year plan to repay your debts.

Your credits have 60 days after the date of your meeting with your creditors to challenge the discharge of a particular debt or the entire discharge plan. If no lawsuits are filed within that 60 day window then your bankruptcy will be discharged soon after the 60 days have expired. If a lawsuit is filed then your attorney will work with you to finalize an agreement with the creditor or creditors who have brought suit.

It is a serious decision whether or not you should file for bankruptcy. If you decide that bankruptcy is the right plan for you then an attorney and the US Bankruptcy Court can help you navigate the different requirements necessary for a successful bankruptcy discharge.

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