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How To File For Bankruptcy Guide

how to file for bankruptcy guide

Bankruptcy is a legal procedure that allows you to get rid of your debts and start over. It’s a way to get out of overwhelming bills, whether they’re from medical expenses, student loans, credit cards, mortgages, or child support. Thus, it can help you get back on your feet financially by erasing the debt that’s dragging you down.

The process is complicated and confusing, and it can be hard to know where to turn first without legal aid. With the help of a qualified bankruptcy attorney, you will get a fresh start and your bankruptcy case will be easier to understand.

With the right information and guidance, you can find your way through the process with ease. Read on to find out more about the different types that are available to you and your debt. This article will cover the basics.

You can find the answers to related questions, such as

  • How much debt should you have to file?
  • Can you just declare bankruptcy?
  • What do you lose when you file Chapter 7?
  • What happens when you file for Chapter 13?
  • Is there a downside to filing?
  • What are the alternatives?

The Basics of Bankruptcy

Bankruptcy Basics is intended to provide detailed information on filing. Some people prefer filing without an attorney. It is known as filing pro se.

However, it’s strongly recommended to seek the advice of an experienced lawyer. You should take it seriously. This is something that can have long-term legal and financial consequences.

Familiarize yourself with the law through the support of your attorney. It is designed to help people who have become overwhelmed by their debt and are unable to pay back what they owe. Whether you are interested in chapter 7 or chapter 13, you can’t just declare bankruptcy if you do not meet certain requirements.

If you aren’t capable of paying your debts, you can likely declare yourself bankrupt. You will also be able to declare in case the value of your belongings is lower than the amount you owe.

How much debt should you have to qualify? No minimum debt is required to file. That said, the amount doesn’t matter. Other factors come into play like your credit report, repayment plan, and interest rates, just to mention a few.

Whatever the case, remember that the period of bankruptcy typically lasts twelve months. Keep in mind that the majority of your creditors will not be able to take you to a court or call you to discuss your obligations.

Related: How Bankruptcy Can Help With Foreclosure

Types of Bankruptcy

The U.S. Bankruptcy Code specifies the rules and procedures for handling each case in federal court. It is also used for referring to any particular type, including

  • Chapter 7
  • Chapter 9
  • Chapter 11
  • Chapter 12
  • Chapter 13
  • Chapter 15

What type of bankruptcy you can file will depend on the specifics of your situation. You should consider many factors, including your debt, credit score, and payment plan. The lawyer will help you make the right choice and opt for a chapter that best suits your situation.

For example, municipalities may try to reorganize themselves by filing under Chapter 9. This includes municipal utilities, taxing districts, school districts, villages, towns, and cities. Businesses looking to reorganize usually file bankruptcy under Chapter 11.

Those who would like to liquidate opt for Chapter 7. Fishermen and family farmers can file under Chapter 12 to get debt relief. If a bankruptcy case involves parties from two or more countries, then Chapter 15 is the most suitable option.

Related: Can you file bankruptcy and keep your house and car

However, Chapter 13 and Chapter 7 are the main types of bankruptcy. Therefore, we will focus on them and shed some light on each of these two chapters.

Chapter 7

is used by individuals with low income or a limited amount of assets. It is also known as liquidation bankruptcy because it wipes out most of your debts in one swoop. You can only file for Chapter 7 if you earn less than a certain amount per year.

Maybe you are wondering what you’ll lose when filing Chapter 7. It’s better to ask yourself what you will get after filing. Chapter 7 can help you discharge or erase everything from your payday loans to past-due rent and credit card balances.

Additionally, you may “lose” your medical bills, car loan balances, as well as overdue utility and cellphone bills. Sometimes it can also erase home mortgages in only 4 months. In this type of bankruptcy, you will:

  • Use the funds from asset liquidation to pay your creditors; and
  • Give up a lot of your possessions so they can be sold for money.

Chapter 13

This is a type of bankruptcy that allows individuals to keep their home, car, or other property and repay their debts over time. They usually repay their debts over three to five years. Chapter 13 bankruptcy is often used by self-employed individuals. It is also used by those who have too much property that they cannot liquidate no matter if they can pay back some or all of their debt.

Chapter 13 is the best option for people who cannot file Chapter 7 for some reason. It is suited for those who own assets that they would like to keep and have enough money to make payments to creditors. What takes place after a Chapter 13 filing? Here’s what will happen after filing Chapter 13:

  • You need to work on developing a plan that will make it easier for you to pay your creditors throughout 3, 4, or 5 years ‒ it will depend on your income.
  • Keep making every payment to your creditors on time.
  • Consider completing a budget or debt counseling course.

After successfully going through these 3 phases, your remaining debt that qualifies for discharge is going to be canceled. Remember that Chapter 13 is recommended for those who have a steady income. It’s a good option if you have some cash left over each month so that debt payments can be made on time. If so, it will give you some extra time and breathing room.

How To File for Bankruptcy

The process is almost the same in all the federal bankruptcy courts in the United States. Still, every case is specific and there might be some local variations. That’s why we will only mention 10 general steps that are included in every bankruptcy process nationwide.

  1. Considering all the options
  2. Choosing the most suitable type of bankruptcy
  3. Hiring a bankruptcy lawyer (or going Pro Se)
  4. Taking a credit counseling course
  5. Filling out all the forms required
  6. Paying court fees
  7. Filing the forms
  8. Meeting with creditors (341 Meeting)
  9. Completing a debtor education course
  10. Having your debts erased

Related: How many times can you file bankruptcy

Once you have received a notice of debt discharge, the process will end. At that point, your debt will be eliminated. This means the process is complete.

In addition to stopping creditor collection efforts, bankruptcy can eliminate or discharge a lot of your debts. However, not all of your debts can be eliminated this way. Some types of unpaid taxes, student loan debts, and child support can’t be discharged.

This is not always a good option. Here are some downsides to filing:

  • It stays on credit reports for several years.
  • If you fail to get legal aid, your filing cost will go from $1,000 to $2,000.
  • Debt discharge can’t be obtained if the debt is mostly made up of a federal student loan.
  • You may end up losing your car, home, and other valuable assets.
  • Due to the discharge of bankruptcy, you may not be able to get new credit lines.
  • You could have problems when applying for jobs in the future.
  • Moreover, you may have a hard time getting future credit with a favorable interest rate.

Filing for bankruptcy will be visible on your credit report for many years (from 7 to 10) upon declaring it. This will make it hard for you to get credit cards and borrow money. As a result, you will have difficulty participating in the financial world. That’s only one of many downsides.

This is why you should be careful before taking the plunge. Is it the most appropriate form of debt relief for you? If bankruptcy is not a good choice for your situation, you should look for alternatives, including the following options:

  • Debt consolidation
  • Loan modification or forbearance
  • Debt management plan
  • Repayment schedule that can reduce your debt
  • Debt settlement
  • Non-profit credit counseling

If none of these alternative options is possible, you should consider looking into bankruptcy choices with the lowest costs. Consult an experienced attorney. Many people file for bankruptcy without the assistance of a lawyer. This is a big mistake.

It is always a good idea to speak with an attorney before filing or making a decision. A bankruptcy lawyer can help you determine the best option for you and make your process less complicated.

Aside from providing legal aid, lawyers can help you find out more about different debt-relief options. Ultimately, the assistance of an attorney will considerably increase your chances of success when filing for bankruptcy. Therefore, it is worth seeking legal advice.

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