If you have found yourself with few tangible assets, deep in debt, and underemployed, life can be unmanageable and stressful. If you have also been facing creditor harassment, threats, and garnishments, you may need to consider filing chapter 7 bankruptcy. There are six basic steps in the process of filing chapter 7.
1. Get Your Debts and Assets Together
You should go through your bills and records to make a list of all your creditors. As you list each creditor, you will want to write down their address, the account number, the amount you owe, and the date of the original debt. Be sure to include each and every one, because if you file, you will want to make sure each debt is included in the bankruptcy petition.
You should also make a complete list of all your assets: property, vehicles, jewelry, income, cash in bank accounts and other things of value. Once you get these lists done, you are now ready for the next step.
2. Consult a Bankruptcy Attorney
An initial consultation with a bankruptcy attorney is usually free. They will look over your lists and ask you some questions about your finances. During this meeting these things will also be discussed:
Alternatives to bankruptcy,
Whether you qualify for chapter 7 or Chapter 13,
The lawyer's fee which may include the court filing fees,
Other records your attorney will need such as income stubs, tax returns, etc.,
Your responsibilities as a filer, and
Your state's exemptions to help you decide which assets you may keep.
The fees may seem like more than you can pay, but you should know once your case is filed, there is an automatic stay imposed on your creditors. This means you will have more time to deal with some of your other responsibilities later, and may free up some money so that you can get started.
3. Take the Credit Counseling Course
You are required to take a credit counseling course before your case can be filed. Your attorney will give you a list of approved providers to choose from. Once you have completed the course, you will need to pay the fees required by the lawyer to file.
Once the filing is complete, if you are contacted by creditors, you should tell them about it and be prepared to give the filing case number. There may be some creditors you should call yourself to let them know of the action. The bankruptcy clerk will be mailing each of your creditors a notice, but this may take a week or more to arrive. Knowledge of the filing should stop any collection activity for the time being.
During this time, you can relax a little bit, and work on increasing your income, if possible.
4. Go To The Meeting of the Creditors
There will be a meeting of the creditors, sometimes called the "341 meeting," scheduled by the court. You will be required to attend and you will need your social security card and state-issued ID card (usually your driver's license). If you are filing jointly with your spouse, they will need to come along and bring their ID and social security card as well. Your attorney will be meeting you there at the federal court building where your state bankruptcy court is.
The bankruptcy trustee (a court official appointed by the court—usually an attorney) will look over your paperwork and ask you a few questions about your filing.
Creditors are also notified of this meeting and may come to ask questions as well, but most of the time they don't. This meeting is usually over in a few minutes.
5. Take the Debtor Education Course
You will need to take the debtor education course within 60 days of your filing date. It is required by law, and you won't receive the discharge if you fail to do it.
6. Wait For the Notice of Bankruptcy Discharge
Eventually you and your creditors will receive notice of your bankruptcy discharge. Under chapter 7, much of your debts will be discharged at this time with a few exceptions. If you have student loans, certain types of tax debt, or child support, you will still owe these. Getting student loans discharged involves a different action called an adversarial action, and it can be difficult, but it's not impossible. You should talk to your lawyer about this, if you are interested.
After the discharge, the effects on your credit record can last up to ten years. However, you can rebuild your credit rating enough to purchase a house or a car much sooner than that, if you work at it. For more information about chapter 7 bankruptcy, talk to an expert.