Are you currently experiencing a mountain of debt? Living with financial struggles is always challenging. It can be excruciatingly stressful, and it may also seem like there’s no way out.
Many people believe that declaring bankruptcy is negative, but it can wipe your debt clean and give you the fresh start you’re looking for.
So, how do you file for bankruptcy?
The Bankruptcy Process
If you’ve already looked at your alternatives, you may have noticed that filing for bankruptcy is one of the best options for reviving your financial health. The process can be long and involves many steps, so you must prepare yourself for that.
Which Type of Bankruptcy?
The bankruptcy option comes in two categories: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy is considered the most common type. During this process, you will voluntarily turn over your assets to the court. The court will then sell your assets and distribute the proceeds to your creditors to pay off your debts.
Certain assets are exempt, such as:
- Motor vehicles
- Pensions
- Equity from a primary residence
- Clothing
- Jewelry
- Household goods
The entire process can take four to six months, assuming the debtor does their part.
Chapter 13 bankruptcy includes setting up a repayment plan, in which the debtor must make payments that are distributed to their creditors each month. This type of bankruptcy is a bit more complex and long-winded than Chapter 7 bankruptcies. It can take up to five years to complete a Chapter 13 bankruptcy.
Get an Attorney
Hiring a bankruptcy attorney isn’t inexpensive. But what if there was a way you could get yourself an attorney at a less costly price or even without being charged? The American Bar Association can tell you more about affordable attorneys who can help with your filing. If you’re unable to afford an attorney, you may qualify for free legal assistance from specific law firms. Your attorney will want to know about your financial situation and ask for relevant documents before filing the paperwork.
Credit Counseling
You must complete a credit counseling session before you file. The session must be through a government-approved organization and completed within 180 days before filing. The credit counseling course aims to help you determine whether bankruptcy is suitable for your situation.
The course can be done online, over the phone, or in person. It often costs around $50, but you may not have to pay it if your income is low.
Required Paperwork
When filing for bankruptcy, the courts will provide a long list of forms that you’ll need to complete, such as the filing petition and your financial statement. It’s pivotal to read each step and instruction very carefully. Filling in the wrong info may result in your file getting rejected.
Pay Court Fees & File Forms
The costs of filing for bankruptcy can be high, with a Chapter 7 filing fee of $245. There’s also a $75 administrative fee and a $15 trustee surcharge. If your income is less than 150% of the poverty level, you may be able to get the fees waived.
After the fees, you’ll have to file your forms through the court. A trustee will then be appointed to your case and will be the person you communicate with throughout the rest of the bankruptcy process.
A Meeting of Creditors
You must attend a 341 meeting, also known as a meeting of creditors. Your creditors aren’t required to show up, but if they do, they may ask you about your financial situation and the bankruptcy process and repayment. Your trustee will also be present to answer any questions on your behalf.
Debtor Education
A post-filing debtor education course is expected of you before your debts are discharged. Much like the credit counseling course, you must go through a government-approved organization and receive a certificate upon completion. The fee may be dismissed if you can’t afford it.
As you’ve read, the bankruptcy process can be long, but it ensures your life is debt-free. We hope you found our step-by-step guide helpful. Good luck on your journey toward finding financial relief.
