How To

How To File for Bankruptcy

If you’ve fallen on hard times and can’t pay your debts, you may consider filing for bankruptcy – a legal process that allows you to get out of debt and start fresh.

But before you decide to file for bankruptcy, it’s important to understand the different types of bankruptcy and how they work.

There are two main types of consumer bankruptcy: Chapter 7 and Chapter 13. Chapter 7 bankruptcy is also known as liquidation bankruptcy because it involves the sale of your assets to pay off your debts.

Chapter 13 bankruptcy is also known as reorganization bankruptcy because it allows you to reorganize your finances and repay your debts over time.

Chapter 13 bankruptcy is also known as reorganization bankruptcy because it allows you to reorganize your finances and repay your debts over time.

We look at what happens when you file for bankruptcy, the steps involved, and how much is it to file for bankruptcy. 

What Does It Mean To File for Bankruptcy?

Bankruptcy is a legal process that allows debtors to discharge all or part of their debts.

The debtor may file for bankruptcy in an effort to reorganize and repay their debts, or the debtor may file for bankruptcy in order to have their debts discharged.

When a debtor files for bankruptcy, an automatic stay is placed on all collection actions against the debtor.

This means that creditors are not able to contact the debtor or take any collection action while the bankruptcy case is pending.

> Read more: What Is Bankruptcy?

Filing for Bankruptcy: Step-By-Step Guide

To file for Chapter 7 bankruptcy, you must complete a means test to see if you qualify. If you do qualify, you’ll need to complete a number of forms and file them with the court. You’ll also need to attend a meeting of creditors, where your creditors will have an opportunity to object to your discharge or repayment plan.

To file for Chapter 13 bankruptcy, you must file a number of forms with the court. You’ll also need to create a repayment plan that outlines how you’ll repay your debts over three to five years.

Once your repayment plan is approved by the court, you’ll make payments to a trustee who will then distribute the funds to your creditors.

Filing for bankruptcy can be complex and confusing, so it’s important to seek out the advice of an attorney to make sure you follow the process correctly.

Here are the steps to file for bankruptcy:

1. Review Your Options

Before you decide to file for bankruptcy, decide whether it’s your best option. Bankruptcy can’t eliminate all your debts, but it can prevent debit collection on your current debts.

Keep in mind that some types of debt can’t be discharged, like taxes, alimony, and student loans

There are alternatives to bankruptcy, including debt consolidation and credit counseling. Depending on your financial situation, you can rather try and earn additional income to cover your debt or restructure your mortgage.

You can also make changes to your lifestyle or lower your monthly budget to help pay off your debts.

If you can’t avoid filing for bankruptcy, start by choosing the right type. 

2. Choose the Type of Bankruptcy

There are two types of bankruptcy that individuals can file: Chapter 7 and Chapter 13. In a Chapter 7 bankruptcy, also known as a “liquidation” bankruptcy, the debtor’s assets are sold off to pay creditors.

In a Chapter 13 bankruptcy, also known as a “reorganization” bankruptcy, the debtor creates a repayment plan to repay creditors over time.

Which type of bankruptcy is right for you will depend on your unique financial situation. To help you make this decision, it is important to review your options with an experienced bankruptcy attorney who can help you understand the pros and cons of each type of bankruptcy.

An attorney can also help you to determine which type will better protect your assets and allow you to get back on your feet financially.

3. Hire an Attorney

Filing for bankruptcy can be a complicated process, so it’s important to have an experienced attorney on your side.

When you hire an attorney to help with your bankruptcy filing, they will be able to help you navigate the process and ensure that all of your paperwork is in order. They can also represent you in court if necessary.

If you’re thinking about filing for bankruptcy, the first step is to contact an experienced attorney who can help you through the process.

4. Attend Credit Counselling

There are two types of credit counseling: pre-bankruptcy counseling and post-bankruptcy counseling. Pre-bankruptcy counseling helps you understand the bankruptcy process and what it means for your financial future.

It also gives you an opportunity to make some last-minute changes to your finances, such as paying off debts or consolidating loans.

Post-bankruptcy counseling helps you develop a budget and plan for your financial future after bankruptcy.

You must attend credit counseling before you can file for bankruptcy. The credit counselor will go over your finances with you and help you develop a budget.

If the counselor thinks that bankruptcy is the best option for you, they will give you a certificate that you need to file for bankruptcy.

If you decide to file for bankruptcy, you must also attend post-bankruptcy counseling. This is typically required by the court once your bankruptcy is discharged.

The counselor will help you develop a budget and plan for your financial future after bankruptcy. 

5. File the Paperwork

Assuming you’ve already gathered all the necessary paperwork, it’s time to file for bankruptcy. The process is actually pretty simple: you just need to file a petition with the court and pay the filing fee.

Once you’ve filed your petition, the court will send out notices to your creditors letting them know that you’ve filed for bankruptcy.

They’ll also appoint a trustee to oversee your case.

At this point, you’ll need to attend a hearing in front of a judge, who will either dismiss your case or grant you a discharge.

If your case is dismissed, it means that you’re still responsible for paying off your debts. If you’re granted a discharge, it means that you’re no longer legally obligated to repay your debts.

Once you’ve been discharged, your creditors can no longer try to collect on your debt. However, there are some exceptions to this rule, so it’s important to speak with an attorney before assuming that all of your debts have been wiped away.

6. Meet with Creditors

If you are considering filing for bankruptcy, one of the first steps you will need to take is to meet with your creditors.

This can be a daunting task, but it is important to remember that your creditors are not your enemies. They are simply businesses that are owed money.

The purpose of meeting with your creditors is to let them know that you are planning on filing for bankruptcy and to negotiate a repayment plan.

It is important to be honest with your creditors and to have a solid plan in place before you meet with them.

If you are unsure of how to approach your creditors or what to say, it may be helpful to seek the advice of a bankruptcy attorney.

An attorney can help you understand your rights and obligations under bankruptcy laws and can assist you in negotiating with your creditors.

7. Debtor Education

When you file for bankruptcy, the court will require you to complete a debtor education course. This course is designed to help you understand how to manage your finances and avoid future debt.

The cost of the course is typically included in your filing fees.

You will need to complete the debtor education course within 180 days of filing for bankruptcy. The course must be approved by the U.S. Trustee’s Office and can be completed online, in person, or over the phone.

Once you have completed the debtor education course, you will receive a certificate of completion that you will need to file with the court.

8. Debt Discharge

Debt discharge is the legal process by which a debtor’s obligation to repay a debt is extinguished. In a Chapter 7 bankruptcy, also known as straight bankruptcy, most debts are discharged.

However, there are certain types of debts that are not discharged in a Chapter 7 bankruptcy, such as child support, alimony, certain taxes, and student loans.

To have a debt discharged in bankruptcy, the debtor must file a petition with the court and attend a hearing.

The court will then issue an order to discharge the debt. The creditor is then legally prohibited from taking any action to collect the debt from the debtor.

If you are considering filing for bankruptcy, it is important to speak with an attorney to determine which type of bankruptcy is right for you and to ensure that all of your debts will be discharged.

better protect your assets and allow you to get back on your feet financially.

What Happens When You File for Bankruptcy?

Filing for bankruptcy is a process that allows individuals or businesses to restructure their debt and obtain protection from creditors.

When you file for bankruptcy, an automatic stay goes into effect that prevents creditors from taking any action against you.

This includes collection attempts, wage garnishments, foreclosures, and repossessions.

If you are unable to repay your debt, bankruptcy can provide relief by giving you a fresh start. Under bankruptcy laws, certain debts may be discharged completely, while others may be reorganized and repaid over time.

Bankruptcy can be a complex and difficult process, so it is important to seek the advice of an experienced bankruptcy attorney before filing.

How Much Is It to File for Bankruptcy?

When you file for bankruptcy, the court will require you to pay a filing fee. The fee for a Chapter 7 bankruptcy is $335 and the fee for a Chapter 13 bankruptcy is $310.

If you’re converting your Chapter 7 to Chapter 13, there is no fee involved. However, if you convert Chapter 13 to Chapter 7, the fee is $25.

If you cannot afford to pay the fee, you can ask the court to waive it.

You can file for bankruptcy without an attorney, but since it’s a complicated process, your chances of success are not as good.

Most people file on their own because they think they can’t afford an attorney, or feel they don’t need one, especially since attorney fees typically make up more than half of the cost of filing for bankruptcy.

The average attorney fee to file for Chapter 7 bankruptcy is $1,250 but this may vary by state.

For Chapter 13 bankruptcy, the average attorney fee is around $3,000.

Your attorney will handle all the paperwork and administration and attorney fees are public record.

> Read more: Research any bankruptcy law firm’s fees on the PACER website

How To File for Bankruptcy Without a Lawyer

You can file for bankruptcy without a lawyer, which is called filing pro se.

However, it’s recommended to work with a bankruptcy attorney since the process is complicated and there is a lot of paperwork to complete.

An attorney can also advise you on whether any of your debts can be discharged, what type of bankruptcy to file for, explain the bankruptcy law to you, and explain the tax implications of filing for bankruptcy.

However, if you want to file pro se, you can get the bankruptcy forms you need free of charge.

> Read more: Download bankruptcy forms

How to File for Bankruptcy with No Money

Eligible filers can file for Chapter 7 bankruptcy free of charge.

To qualify, the household income should be less than 150% of the poverty level. You can then ask the judge to waive the filing fee.

You can also ask for the financial management and credit counseling fees to be waived.

How Long Does Bankruptcy Stay On My Credit Report?

Bankruptcy will stay on your credit report for up to 10 years, but this does not mean that you will be ineligible for credit during this time.

You may still be able to get a mortgage, car loan, or another type of financing after bankruptcy. The key is to start rebuilding your credit as soon as possible after your discharge. 

There are a few things you can do to help improve your credit score after bankruptcy:

  • Get a secured credit card.
  • Use your credit card responsibly and make all payments on time.
  • Keep your balances low.
  • Try to get a mix of different types of credit, such as an installment loan or revolving line of credit.
  • Check your credit report regularly and dispute any errors you find.

> Read more: How To Improve Your Credit Score

Alternatives To Bankruptcy

There are a few alternatives to bankruptcy that can help you get your finances back on track.

Debt consolidation, credit counseling, and negotiating with creditors are all possible options to explore before filing for bankruptcy.

Debt consolidation involves taking out a new loan to pay off existing debts. This can be a good option if you can find a loan with a lower interest rate than what you’re currently paying.

Credit counseling is another option to consider.

A credit counselor can help you develop a budget and negotiate with creditors to lower interest rates or waive fees.

If you’re struggling to make ends meet, it’s important to explore all of your options before turning to bankruptcy.

With careful planning and some patience, you may be able to get your finances back on track without resorting to bankruptcy.

Summary

Filing for bankruptcy can be a difficult decision to make, but it is often the best option for those who are struggling to manage their debt.

The process can be complicated, but with the help of a bankruptcy lawyer, you can navigate the process and get your finances back on track.

If you are considering filing for bankruptcy, we encourage you to contact a bankruptcy lawyer to discuss your options and figure out what is best for you.

FAQs

If you file for bankruptcy can you keep your car? 

If you file for bankruptcy, you may be able to keep your car. However, this will depend on a few factors, such as the value of your car and whether you are current on your payments.

If you are current on your car payments and your car is worth less than a certain amount (which varies by state), then you may be able to exempt your car from the bankruptcy estate. This means that you can keep your car.

However, if you are behind on your payments or if your car is worth more than the exemption amount, then your car may be subject to repossession or sale in order to pay off your creditors.

Talk to an experienced bankruptcy attorney in your state to find out if you will be able to keep your car if you file for bankruptcy.

Why do people file for bankruptcy?

There are many reasons why people may file for bankruptcy. Some people may have amassed a large amount of debt that they are unable to pay off, while others may have experienced a significant financial setback such as a job loss or medical emergency.

Whatever the reason, filing for bankruptcy can provide relief from creditors and help individuals get back on their feet financially.

When someone files for bankruptcy, they are essentially asking the court to discharge their debts. This means that the individual will no longer be legally obligated to repay their creditors.

In most cases, all of the debtor’s assets will be sold off in order to repay as much of the debt as possible. 

However, certain types of property such as tools of the trade or essential personal belongings may be exempt from being sold.

Filing for bankruptcy can be a complicated and stressful process, but it can also provide much-needed relief for those struggling with unmanageable debt.

If you are considering filing for bankruptcy, it is important to speak with an experienced bankruptcy attorney to discuss your options and ensure that you are taking the best course of action for your particular situation.

How much debt should you have to file for bankruptcy?

In most cases, you will need to have at least $10,000 in debt in order to file for Chapter 7 bankruptcy. If you have less than this amount, you may still be able to file for Chapter 13 bankruptcy.

When determining how much debt you should have before filing for bankruptcy, it is important to keep in mind that this number is just a general guideline.

Your specific situation may warrant filing for bankruptcy even if your debt is below the $10,000 threshold. If you are unsure whether or not you should file for bankruptcy, it is always best to consult with an experienced bankruptcy attorney who can help you determine if filing is right for you.

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Lorien is the Country Manager for Financer US and has a strong background in finance and digital marketing. She is a fintech enthusiast and a lover of all things digital.

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Last Updated: November 21, 2022

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