How to File for Bankruptcy: 13 Easy Steps

The increase in the number of Americans filing for individual bankruptcy this year has been significant. According to Epiq AACER, a firm that tracks bankruptcy cases, filings for Chapter 7 bankruptcy, the most common type, have risen by 15% in the first nine months of the year.

Michael Hunter, vice president of Epiq AACER, noted that this “sharp rise” in filings highlights the growing financial pressure on households across the country. For those considering bankruptcy as a solution to mounting debt, it is crucial to understand the long-term consequences such as damage to credit scores and limited borrowing options.

To guide individuals through the process of filing for bankruptcy, here are the key steps to follow:

1. Consult a bankruptcy attorney: While it is possible to file for bankruptcy without legal representation, seeking advice from an experienced bankruptcy attorney significantly increases the likelihood of a successful outcome. Legal aid can help navigate the complex process and maximize the chances of receiving a discharge.

2. Get your financial documents in order: Before diving into official bankruptcy forms, gather essential documents such as identification, tax returns, proof of income, bank statements, and a list of creditors. Organizing these documents upfront can streamline the filing process.

3. Understand your debt and choose a course of action: Determine the type of debt you need to address and decide between Chapter 7 and Chapter 13 bankruptcy. Chapter 7 offers a quicker resolution, while Chapter 13 involves a long-term repayment plan.

4. Complete the first credit counseling course: Prior to submitting bankruptcy forms, complete a mandatory credit counseling course approved by the Department of Justice. This step is essential for all bankruptcy filers.

5. Fill out bankruptcy forms: Complete the necessary bankruptcy forms, including a petition and statement of financial affairs. Legal aid can assist in accurately completing these forms to avoid rejection.

6. File bankruptcy forms in court: Submit the completed forms to your federal district’s bankruptcy court. Ensure compliance with local regulations and pay applicable filing fees.

7. Mail documents to your court-appointed trustee: Provide requested documents to the bankruptcy trustee appointed to your case. Cooperation with the trustee is crucial for a smooth process.

8. Attend the ‘341 meeting’ of creditors: Participate in a mandatory meeting with the trustee and potentially creditors to discuss your financial situation under oath. This meeting is a key step in the bankruptcy process.

9. Handle nonexempt property: Understand the treatment of nonexempt assets in Chapter 7 and Chapter 13 bankruptcy. Protect essential assets through exemptions and be prepared for potential asset liquidation.

10. Keep making payments on secured debts: Continue making payments on secured debts to retain property such as vehicles or homes. Nonpayment could result in repossession or foreclosure.

11. Wait for eligibility determination: Be prepared for potential objections to debt discharge and audits by the Department of Justice. Compliance with legal requirements is essential for a successful bankruptcy outcome.

12. Complete the debtor counseling course: After meeting eligibility requirements, complete a debtor education course approved by the Department of Justice. This course is necessary before debt discharge.

13. Wait for discharge: Depending on the chapter of bankruptcy filed, debts may be discharged within a few months (Chapter 7) or after completing a repayment plan (Chapter 13). Compliance with all requirements is crucial for a successful discharge.

In summary, the process of filing for bankruptcy involves careful consideration of personal finances, legal guidance, and compliance with court requirements. By following these steps and seeking appropriate legal assistance, individuals can navigate the bankruptcy process effectively and work towards a fresh financial start.