What Happens When You File For Bankruptcy?


What Happens When You File For Bankruptcy?

Financial hardship is difficult, but it happens to everyone in some form or another. Sometimes those hardships can become so great that bankruptcy becomes an option. While choosing whether bankruptcy is the best option for you is a difficult decision, your bankruptcy attorney can help sort out the details and guide you towards the best path for your particular case. Every case is different, and there are a number of factors that play into how you’ll file. However, knowing what to expect before you enter the process can help you make an informed decision and put you at ease. Here are the basic components to bankruptcy filing.

Paperwork and Filing Fees

There is a lot of paperwork involved in the bankruptcy process, and it all has to be filled out perfectly and on a certain schedule. Ironically, there are also filing fees to pay when you submit your bankruptcy paperwork. For Chapter 7 and Chapter 13 bankruptcy, it’s usually about $200 to $300. For Chapter 11 it’s nearly $2,000.

Automatic Stay

As soon as your filing is done you’ll receive what’s called an automatic stay. That means all collections activities against you are frozen until the bankruptcy is closed. In other words, you can take a breath without having to deal with harassing, nonstop collection calls and bills coming in the mail for credit card payments.

Credit Counseling

The government requirements anyone who is filing for bankruptcy to take credit counseling 180 days before you file. Be sure to check with your local bankruptcy laws and make sure you’re taking a course that is court-approved. You’ll also have to take a debtor education course if you want to discharge your debt via Chapter 7 bankruptcy.

Creditors Meeting

In most bankruptcy cases, you’ll have a meeting with your bankruptcy trustee, your bankruptcy attorney, and any creditors who choose to come. It’s a meeting that happens at a courthouse during which you’ll have to answer questions about your financial situation and your decision to file. It can feel a little invasive and nerve-racking, but it’s really just a chance for you to present your case and explain the financial hardships that led up to your decision to file. Having an experienced bankruptcy attorney present is a good idea because he or she can advocate more effectively for you than you will probably be able to on your own unless you have extensive legal knowledge.

This meeting will happen a few weeks after you file. You’ll receive a decision about your bankruptcy request and the official filing will be made shortly thereafter if you’re accepted. It’s good to bring any documentation that validates your financial situation as well as proof that you’ve made attempts to correct your situation on your own before considering bankruptcy.

Liquidation of Assets For Chapter 7

If you’re filing Chapter 7 bankruptcy, the next step will probably be the liquidation of your assets. However, only nonexempt property can be sold for liquidation purposes Your car and home are usually exempt since not having them would impose undue hardship upon you. However, most creditors opt to pass on collecting items in question because they usually feel that the cost of retrieving and liquidating the items just isn’t worth it. Because of that, very few Chapter 7 bankruptcy debtors ever have to part with their property unless they have multiple homes or something of that nature.

Payment Plan For Chapter 13

If you file for Chapter 13 bankruptcy, your next step will be to negotiate and agree to a payment plan. You might have opted for Chapter 13 or you might have had to file Chapter 13 by default because you didn’t pass the Chapter 7 means test. Either way, have your bankruptcy attorney by your side so you can make sure the payment plan negotiated has your best interest at heart and will set you up for success. The plan will spread your total debt into monthly payments. Some debt amounts may be reduced or eliminated during the process. That being said, priority debts such as child support, employee wages, alimony, and tax obligations cannot be reduced or eliminated and must be paid in full over the course of your payment plan.

Moving Forward

Once you’ve begun repayment, your next step is to make sure you don’t miss a single payment going forward. Meet with your bankruptcy attorney to craft a solid plan that will set you up for success. If you filed for Chapter 7, your next step will likely be having your slate wiped clean save for any debts that can’t be included in bankruptcy. Debts that can’t be wiped out are things like child support, alimony, and tax obligations. Regardless, you can now move forward in the knowledge that your burden is much lighter and that you have a new lease on your financial life.

While there’s no legal requirement to hire a bankruptcy attorney, it’s highly advisable that you do so. Bankruptcy is a legal matter and is more nuanced than most people realize. A qualified and experienced bankruptcy attorney can make sure you’re doing everything correctly, in the proper order, and on time. Additionally, a bankruptcy lawyer can advocate for you and negotiate the best possible outcome for you. The bankruptcy process can be difficult, but you don’t have to go it alone. Consult with a bankruptcy attorney today and take the first step on the road towards protecting your financial future.


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