The Bankruptcy Filing Procedure - Thomas K. McKnight LLP
There are several legally required steps involved in filing for bankruptcy. Failing to complete them can result in the dismissal of your case.
Before filing for bankruptcy, individuals are required to complete a credit counseling session and acquire a certificate to file with their bankruptcy petition. The counselor should assess your personal situation, offer guidance on budgeting and debt management, and discuss alternatives to bankruptcy. You can find the names of government-approved credit counseling agencies in your area by calling the federal bankruptcy court closest to you or by going to its website.
Filing for bankruptcy involves submitting a bankruptcy petition and financial statements showing your income, debts, and assets. You will also be required to submit a means test form, which determines whether your income is low enough for you to qualify for Chapter 7. If it is not, you will need to declare Chapter 13 bankruptcy instead. You will also have to pay a filing fee, though it is occasionally waived if you can prove you can not afford it.
You can get the forms you need from the bankruptcy court. If you use the services of a bankruptcy lawyer, which is generally a good idea, they should also be able to supply them.
When you have filed, the bankruptcy trustee designated to your case will arrange for a meeting of creditors, also referred to as a 341 meeting for the section of the bankruptcy code where it is mandated. This is an opportunity for individuals or companies that you owe money to ask questions regarding your financial situation and your plans, if any, to repay them.
Your case will be decided by a bankruptcy judge, based on the information you have provided. If the court determines that you have attempted to conceal assets or committed other fraud, you may not only lose your case but additionally face criminal prosecution. Unless your case is really complex, you usually will not need to appear in court before the judge.
After you have filed for bankruptcy-- but before your debts can be dismissed-- you must take a debtor education course, which will give guidance on budgeting and money management. Once again, you will need to receive a certificate showing that you have participated. You can obtain a list of accepted debtor education providers from the bankruptcy court or from the Justice Department.
Presuming the court decides in your favor, your debts will be absolved, in the case of Chapter 7. In Chapter 13, a payment plan will be authorized. Having debt cleared means that the creditor can no longer try to collect it from you.
When to Declare Bankruptcy
Bankruptcy law exists to assist people who have taken on an unmanageable amount of debt-- often as a result of large medical bills or various other unanticipated costs that are no fault of their own-- to make a fresh start. But it isn't an easy process and does not always result in a happy ending.
So before filing for bankruptcy, be sure to explore all your alternatives and be prepared for some negative consequences. If you decide that bankruptcy is your only viable option-- as hundreds of thousands of Americans do each year-- remember that the blot on your record will not be permanent. By using credit cautiously in the future and paying your bills on time, you can begin to restore your credit and gradually put bankruptcy behind you.