If you're considering whether or not to file for personal bankruptcy to ease your debt burden, you're probably wondering what steps you need to take.
The bankruptcy process can be complicated, and the requirements and steps involved depend on your income, assets, and which type of bankruptcy might be right for you.
To ask a bankruptcy attorney directly about how a personal bankruptcy case might work for you, simply fill out this form to arrange a free, no-obligation consultation today.
Steps in the Chapter 7 Bankruptcy Process
Once you've decided to file for personal bankruptcy, your next step is to find out whether you can file under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Each chapter offers different types of protection and tends to work for filers in specific financial circumstances.
Here's a general idea of what to expect if you qualify to file for Chapter 7 bankruptcy:
- Means testing: In order to file Chapter 7, you'll need to pass the means test. This test compares your household income to the median in your state, and also takes into consideration household expenses. If you income is below the median, or you have little disposable income, you'll likely be eligible to file Chapter 7.
- Credit counseling briefing: Before filing your petition with the court, you'll have to complete a credit counseling briefing. This is designed to make sure that bankruptcy is truly the best option for you.
- File your paperwork with the court: When you have your credit counseling certificate of completion, you and your bankruptcy lawyer can file your bankruptcy forms (called "schedules") with the court.
- The automatic stay takes effect: This is one of bankruptcy's most powerful legal protections. It works by preventing creditors from taking collection action of all kinds against someone with an active bankruptcy case.
- You attend the creditors meeting: At this meeting, you'll swear to the accuracy and completeness of all the information in the schedules you filed with the court.
- You handle your non-exempt property: Anything you own that is not protected by your state's exemption laws must be surrendered to your bankruptcy trustee. He or she will sell it and use the money toward repayment of your creditors.
- You handle your secured debts: While Chapter 7 bankruptcy can offer filers a discharge of unsecured debts (those not connected to any property), it cannot excuse secured debts (like cars and houses). You must enter an agreement with the lenders of such debts outlining how you wish to proceed (whether by surrendering the property, continuing payments or settling in cash).
- Financial management course: Before receiving your debt discharge, you must complete a certified financial management course, which is designed to provide the financial skills necessary to build credit and make wise decisions after bankruptcy - and hopefully not need to file again in the future.
- You receive your discharge from the court: Assuming you case has proceeded normally, in as little as three to six months after filing, you should receive a discharge from the court. This discharge may excuse many of your unsecured debts (except those that cannot be discharged in bankruptcy, such as child support and most tax debts).
Bankruptcy Steps in Chapter 13 Cases
If you choose to file for Chapter 13 bankruptcy, your case will look similar to a Chapter 7 case for the first three steps. But, after the automatic stay takes effect, things differ between the two chapters.
- You attend two meetings: In addition to the creditors meeting, Chapter 13 filers must attend a confirmation hearing in which the bankruptcy trustee either approves or denies the repayment plan.
- You make payments: Chapter 13 repayment plans allow filers to catch up on past-due debts while staying current on other debts. These repayment plans last for a period of three to five years; you'll have to make a regular payment every month for this entire period.
- You receive your discharge: Assuming you case has proceeded normally, after you've completed making payments as outlined in your repayment plan, you can expect to receive a discharge from the bankruptcy court. Any balances leftover on unsecured debts may be excused, as long as you didn't promise to pay it in your repayment plan.
Learn More from a Bankruptcy Lawyer
If you're ready to figure out which type of bankruptcy might work best for you, take a moment to connect with a bankruptcy lawyer right now.
This is for informational purposes and is not
legal advice. Speak to a local bankruptcy attorney for legal advice about
your particular situation.
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