So, you’ve assessed your finances and decided that filing for bankruptcy is your best option? If this is your decision, then I hope this article will help you in filing for bankruptcy.
Before that, I want to emphasize two things:
- There is no shame in filing for bankruptcy. Bankruptcy is not just for the middle and lower class. In fact, many rich people and even large companies file for bankruptcy.
- You don’t need to fear bankruptcy. Bankruptcy will not destroy your financial future (this is our common misconception). In fact, it is designed to help people get out of debt they can’t carry and get a financial fresh start.
I am telling these to let you know that you don’t need to carry a heavy heart when making this decision. Bankruptcy is not as bad as you think. Again, its main purpose is to help those who cannot get out of their debts anymore. Bankruptcy will give you a fresh start after you’ve undergone its process.
Without further ado, let’s talk about how the steps you need to take to file for bankruptcy.
STEP 1: Take your time in finding a trustworthy lawyer
You may think that this step is easy. Yes, it is easy to find a lawyer. Yes, it is to hire one. But what is not easy is finding a lawyer whom you can trust.
But what does it mean by a “trustworthy” lawyer? For this purposes, a trustworthy lawyer is someone who is both experienced in his/her field (in this case, bankruptcy) and someone who cares about his/her client.
Most people only seek the skills and experience, but a lawyer who does not care about your legal well-being will give you a hard time. Examples are charging of unreasonable fees, a lawyer who doesn’t answer you when you need to discuss something important with him/her, or sometimes, the lawyer is just outright rude.
Lastly, if the lawyer doesn’t even care about you, how would you win or maximize your case? Despite the experience and skills they have, you probably won’t win because they only care about the money they can make from you.
STEP 2: Discuss your options with your lawyer
Many clients think that they only have one option in their case. This is often not true. So, ask your lawyer about the options you can use to maximize your gains.
In the case of bankruptcy, this may mean that you can keep most (or even all) of your assets while your case is undergoing. Many surrender to the “fact” that they will lose assets in a bankruptcy case, but the truth is, you can keep them.
STEP 3: Gather the necessary documents
Once you’ve discussed your options, it’s time to gather the necessary documents. For the basics, here are some of them:
- Information about your income for the past 3 years
- Debts (creditors)
- Monthly expense
- List of all your properties (including clothing and electronics)
- Employment or business status
Your lawyer should guide you in this list. The documents necessary would depend on what Chapter you had chosen to take.
STEP 4: Attend a pre-bankruptcy credit counseling session.
It is required by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA of 2005) that all filers are required to complete a credit counseling session with an approved provider within six months of filing before their case can be filed.
Now that you’ve gathered your documents, it’s time to attend a pre-bankruptcy credit counseling session. If you wonder why you need to do this, it’s because the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA of 2005) requires all filers to complete this session (and finished within an approved provider within six months of filing) before they can proceed with their case.
STEP 5: Your nonexempt property is handled.
Your nonexempt properties are properties which are generally placed for liquidation. These properties will be sold and the proceeds from it will be paid to your creditors. Your trustee will handle all of these, so no need to worry.
However, you can negotiate with your trustee to keep some of your nonexempt properties if you can come up with enough cash to secure the properties.
STEP 6: Sign the petition and get the case filed.
Once the payment is made and everything is settled, your lawyer will prepare the proper papers. You will just wait for him/her to prepare the papers. Once he’s done, you just need to sign the petition, and afterwards, your lawyer will begin filing the case for you.
STEP 7: The court reviews your eligibility for your case
The bankruptcy court will review you case and determine if you are eligible for the case or not. Your eligibility requirement depends on the Chapter you chose.
So be sure you’re eligible, ask your lawyer on what you can do so you can pass this eligibility test.
STEP 8: Pre-discharge financial management course.
After filing for bankruptcy, and before you get a discharge, you must complete a debtor’s education course according to the 2005 amendments to our bankruptcy.
After completing this class, you will be asked to file Form 423 certification of a financial management course with an approved provider before your case can be eligible for discharge.
STEP 9: Court date
After you have filed a petition (and your papers well-examined by your trustee), a court date will be set for your case after 20-40 days. In this meeting, all your creditors will be there and they will question you with regards to your assets and financial capacity which you need to respond to. You will be asked questions by the trustee who will decide whether to approve the bankruptcy or make changes.
Once you’ve filed your petition and all necessary papers are reviewed well, the court will finally set a date for your case, usually after 20-40 days.
In this meeting, your creditors will ask you regarding your assets and financial capability, of which you need to respond to. Then, your trustee will also ask you necessary questions, and if he/she is satisfied, he will approve your bankruptcy case.
Otherwise, you and your lawyer will need to make certain changes in your case.
STEP 10: Discharge
This is when the case is officially finalized – but second to the last of the steps. The bankruptcy filer is discharged 60 days after the meeting with the trustee unless one of your creditors takes action against you.
Once your case is approved, you will be discharged within 60 days after the meeting with your trustee unless one of your creditors suddenly disagrees and takes action against you.
STEP 11: Case closed.
Once your discharge is granted by the court, you get an official closure of your bankruptcy case. You will finally be set to most, if not all, of your debts! Once your case is closed, you can finally start again with your finances and move on with your life!
Steps for filling bankruptcy is that simple, though certainly not easy. That’s why it’s important to have a trustworthy lawyer with you. All the best!