01Visit with a qualified bankruptcy attorney.
Most bankruptcy attorneys offer an initial consultation for free. Take advantage of it. The attorney will offer you his or her best advice based on your personal circumstances. You will likely find that that advice and the services the attorney will perform are well worth the fees the attorney will charge for handling the case for you. If you want to go it alone. Do your research. Here are some articles to get you started:
02Gather your documents and financial information.
Every debtor (that's what we call the person who files a bankruptcy case) provides complete and accurate information to the court on his income, expenses, debts, property (real estate and personal property) and his financial dealings in the months and years leading up to the filing of the case. These are called "schedules" and the "statement of financial affairs." There's a lot of data to be gathered, and it may seem intimidating, but your attorney will be able to help you through it. And, it will be worth it in the end when your discharge is entered.
03Participate in a credit counseling session.
Most individuals must participate in a meeting with an approved credit counselor before filing a case to determine if other options, like a debt management plan, would work better than a bankruptcy. You must complete this session no more than six months before you file the case.
04Decide which type of bankruptcy to file.
Chapter 7 or Chapter 13? There are many factors to consider in deciding whether a straight bankruptcy or a payment plan bankruptcy is better.
Some of the factors an attorney will help you sort out include:
- How you fare on the Means Test, which is designed to determine whether you can afford to pay at least a portion of your bills.
- If you have a lot of business debt.
- If you owe back payments on a house or a car.
- If you owe back taxes.
- Whether someone else co-signed on a debt for you.
05File the bankruptcy case.
Your attorney will handle filing the case for you. Once your case is filed, an injunction called the "automatic stay" goes into effect and a notice is sent to all your creditors. The automatic stay prohibits creditors from taking most collection actions against you. So, once they're informed of the bankruptcy case, expect no more collection calls, garnishments, nasty letters, repossessions, foreclosures or lawsuits without permission of the bankruptcy court.
06Attend the meeting of creditors.
Every debtor attends a meeting about a month after the case is filed. This meeting is called the meeting of creditors, or Section 341 meeting, even though creditors rarely attend. It is held under oath, and you will give testimony, mainly affirming the information you've already provided in your schedules. The trustee assigned to your case will take this opportunity to learn more about your situation, employment, assets, debts, expenses or other pertinent questions.
07Cooperate with the trustee.
If all of your property is exempt, the trustee will promptly notify the court that there are not "assets to administer," meaning that he will have no reason to gather and sell any of your property. Usually, this marks the end of his role in the case. If, however, you have non-exempt assets, the trustee will need your cooperation to gather and sell those assets. That may require you providing additional documents or information about your prior financial dealings, or providing access to the property. If you fail to cooperate, you could lose your right to a discharge.
08Perform your obligations during the case.
In a Chapter 13 case, you'll have three to five years to make payments that will go toward paying down your debt. Make your payments as you propose in your payment plan, and you will receive your discharge at the end of the payment period.
In a Chapter 7 case, if you have property that is collateral on a loan, you filed with your schedules a "Statement of Intention," in which you stated whether you would surrender the collateral, reaffirm the debt (continue making the payments) or redeem the property (pay the value). Depending on what you choose to do with the collateral, the bankruptcy laws impose a deadline of 30 to 45 days after the meeting of creditors to accomplish it.
You may be asked to provide other documents during your case, like updated income records, tax returns, or statements regarding child support or alimony. This falls under the heading of "continued cooperation." If you don't do it, you won't get your discharge.
09Take your debtor education course.
Every individual debtor must take an approved course in financial responsibility to be eligible for a discharge. If you don't take the course, your case could be closed without the discharge.
10Live happily ever after.
Well, you might have to work at this one. It's an ongoing process.
The bottom line is that filing bankruptcy should not ruin your life. In fact, it should enhance it significantly. It may take a couple of years to bring your credit score up to a decent level, if that's a goal you'd like to work toward. In the meantime, you've learned some good lessons that you should be able to carry with you throughout your life and - hopefully - put into practice to avoid some of the circumstances that brought you to this place.
Nine Steps to a Successful Bankruptcy Case
Are you thinking about filing a bankruptcy case? One of your first considerations is whether to file on your own (called filing pro se) or hire an attorney to help you file your case. Although you can file a case without benefit of an attorney, it is extremely difficult to obtain a discharge without professional help.