Bankruptcy can be a hard pill to swallow, especially if you consider yourself to be responsible. The credit card companies don't care about making things easier for you, no matter how loyal you have been. Here's what to expect when you file bankruptcy, and how to make it as painless as possible.
Under the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), prior to filing a bankruptcy case, an individual must obtain some consumer credit counseling from an entity approved by the U.S. Trustee within 180 days of the date of the filing of a bankruptcy case.
Consider the two common bankruptcy types. The most popular is the chapter 7 (which is a straight or liquidation bankruptcy), and there is also the chapter 13 (which is a repayment plan for individuals). BAPCPA has made it more difficult to file a chapter 7 case because of the means test.
Research your options as it relates to filing. Some people choose to file without the aid of a lawyer. However, it's highly recommended to hire a lawyer. In most cases, people who choose large firms to represent them will work with a paralegal and not the lawyer. Try to find a firm in which you have direct contact with your lawyer.
Meet with the lawyer you've selected and go over your "case." They will determine which chapter is best for you, based on your financial affairs. A lawyer will also assist you with completing the BAPCPA's means test.
Find out how much it will cost. Some lawyers will charge a flat fee, while others will charge based upon the amount of debt that you have. The former is always the best route to go. The average fee is $1,700. There are some places that will file for free if you do not have the financial means to do so. The average fee will vary depending upon where you live.
Refer all creditors to your lawyer's office, once he or she has been retained. They will then be able to speak on your behalf (which means no more annoying calls). Once your lawyer has filed your case, the "automatic stay" goes into effect. This means that NO creditors should be contacting you about your debt. This stay is enforced, and creditors can be liable if they go against it.
Wait for a meeting of creditors. This meeting allows the trustee to ensure that you have given truthful answers on your bankruptcy petition, and that you understand and agree to filing for bankruptcy. Your lawyer should have met with you prior to this meeting to go over all of your debt to ensure that it is all listed. You must also list all of your assets. Prior to the meeting, you should have reviewed your file with your lawyer. Once you are sworn in at the meeting, you will answer questions that are recorded. The meeting will last about ten minutes.
If you are thinking about filing a bankruptcy case, do not use your credit cards. If you do so with the intent to file, a creditor can challenge the discharge of the debt owed or even your right to discharge any debt. If you obtained the debt knowing that you could not repay it, you may not be able to discharge that debt if the creditor challenges it through a lawsuit, or adversary proceeding, in your bankruptcy case.
In a chapter 7 case, the trustee will determine whether or not there are assets that can be liquidated and used to repay your creditors. If the trustee determines that all your assets are exempt, a report of no distribution will be filed with the bankruptcy court. If the trustee determines that there are non-exempt assets, they will be sold and payments may be made to your creditors. In a chapter 7 case, you may never have to pay a creditor back. In a chapter 13, you will be required to enter into a 3 to 5 year plan, in which you will pay creditors as much as you can over time, taking into consideration the BAPCPA means test.
The 60th day after your meeting of creditors is first set is the deadline for creditors to file lawsuits to challenge the discharge of a particular debt or your entire discharge. If no such lawsuits are filed, shortly after that 60th day you will receive notification of a discharge of debt if you filed chapter 7. A discharges means that you have no further obligation to repay the discharged debt (the existence of that discharged debt may still appear in your credit reports), and that your creditors can never collect the debt from you. If you filed chapter 13 case, you will receive the notice of discharge approximately 30 to 60 days after your final payment has been made and the trustee ensures your payment plan has been followed and completed.
Chris Simons is a prolific freelance writer. You are welcomed to visit http://bankruptcy.cyberinformer.com, for more information on Bankruptcy.
