Filing a Bankruptcy Case

When you find yourself with lots of credit but have no money to pay for it and when your creditors are already threatening to file a case against you yet you remain unmoved – it could only mean one thing, you’ve gone bankrupt.  To help you deal with your current situation, there’s always the last resort – filing a bankruptcy case.

The Details

There are two types of bankruptcy case –Chapter 7 and 13.  The former is a liquidation bankruptcy while the latter is a repayment plan for individuals.  Although Chapter 7 is the most popular, many people are forced to file Chapter 13 because of the difficulty in filing the former.

The Steps

Knowing what to do and how to do things are both key to a hassle-free bankruptcy filing.

1. Triple-check your assets and your debts.  Is filing bankruptcy your last resort or are there other ways?  Keep in mind that a bankruptcy case stays with you for a good ten years and of course, because it is public information, anyone can access your records.

2. Once you’re decided, start doing research on which chapter is most applicable and reasonable for your case.  Begin by getting a good lawyer who can help you in making these major decisions.  It is never suggested to file on your own as professional help, in most cases, is a requirement to get a favorable decision from the court.

3. Discuss everything with your lawyer.  Make sure you tell him all your debts and identify all creditors.  He will also help you complete the BAPCPA’s means test in case you’ve chosen to file Chapter 7.

4. Pay the applicable filing fees.  There are lawyers who charge flat fees while others base it on the volume and amount of your total debt.  In a Chapter 7 case, you are required to pay your lawyer in full as he cannot represent you in court when he is also your creditor.  If he allows partial payments, then he may no longer collect the balance once the case has already been filed.  A Chapter 13 case allows more leeway for payment since you have the option to pay your lawyer in installment before, during and after the case has been filed.

5. Once your lawyer has filed your bankruptcy case, the automatic stay becomes in force.  This means no creditor is allowed to contact you and if they do, it may result to punitive damages.

6. Wait for advice on the schedule of meeting of creditors and attend this with your lawyer.  Prior to this, your lawyer should have revisited your case, i.e. reviewed all your debts, assets and informed you of the possible questions that may be asked during the ten-minute meeting.

7. Lastly, the trustee will evaluate all your assets and decide on which of these are exempted from liquidation.  All assets that are non-exempt will be sold and the proceeds will be used for payment to creditors.  A Chapter 7 case may free you from paying all debts. In a Chapter 13 case, on the other hand, you will be asked to enter into a three to five-year repayment plan.

The Reminders

1. In a Chapter 7 case, your creditors only have 60 days after the meeting of creditors to challenge the discharge of your debts.  If no lawsuits are filed, you will immediately receive a notification of release from your debts.

2. Keep in mind, though, that even in a Chapter 7, not all debts can be discharged.  Examples of such are tax bills and student loans.

3. You should observe a retention period of at least one year for all bankruptcy files and documentations.

4. Every person is allowed to be discharged of debts through a Chapter 7 case once every eight years.  A Chapter 13 case is limitless and can be filed anytime.