Chapter 7 Bankruptcy – A How To Guide

Economically challenging times will typically result in or be measured by a pool of debt. In times such as these, bankruptcy may pose as a worth while option. However, before deciding to move forward with a Chapter 7 bankruptcy, (the procedure by which the debtor (you) relinquishes non-exempt properties to a trustee, who then converts it to currency with which to pay off creditors) you should know just what you’re about to get into. Knowing the possible alternatives and consequences will help you in making an informed decision. In this article, we will walk you through the process involved in a Chapter 7 bankruptcy filing.

Step 1 – Educate yourself. Keep in mind that your credit report will be scarred by the letter “B” for the better part of a decade. Additionally, recent laws require individuals to partake in a credit counseling course no less than six months before the filing can began. An additional financial management course must be completed as well before any debts can be discharged.

Step 2 – Find out whether you are eligible in the first place. In order to qualify, individuals will have to figure out whether their average incomes from the previous six months is under the median amount for the state in which they reside. If it happens to, you will be able to file without worry. If you do not automatically qualify, there are other options available. Get in touch with your local bankruptcy court to find out whether there are any other ways to get the process rolling.

Step 3 – Keep an open mind to other options. Chapters 13 and 11 are alternatives worth researching and will help you adjust your debt rather than discharging it all together. If you happen to be a business owner and are interested in keeping your business going, Chapter 11 may be the best option for you. This will help you reduce your monthly debt amount and make the payments more comfortable.

Step 4 – Get organized. Be sure to have all of your creditor information, information pertaining to the nature and amount of the debt you owe, monthly bills, property, proof of current income, tax returns and any other financial information you have available. This will help to save you time and money by minimizing the amount of time you will spend with the attorney.

Step 5 – Speaking of attorneys, you’re going to need one. Many lawyers offer clients a free initial consultation. This will help you evaluate whether the attorney is qualified and able to help you through the process. Fin out what their services will cost, along with all of the fees that will be incurred. Filing is generally $300, with attorney fees ranging from 1-3 grand.

Step 6 – A Chapter 7 bankruptcy petition must be filed with the local court. Additionally, you will need to file, a liability and asset schedule, a current income schedule, leases and contracts schedule, and more. Your attorney will be able to provide you with a list of the necessary documents.