When You File Bankruptcy
When You File Bankruptcy
When you file bankruptcy, you’ll likely experience a range of emotions. There’s some relief that you won’t need to deal with the daily hassle and aggravation of having debt collectors pursuing you. There’s some trepidation because you likely aren’t convinced yet you’re making the right move. And there’s likely some excitement, because you’ve finally taken a significant step toward resolving your financial issues.
Bankruptcy is a major step and it isn’t one to be taken lightly, but for many, it’s the best possible option based on their circumstances. It can be the clearest path to a brighter financial future.
What Happens When You File for Bankruptcy?
First, let’s take a look at a few of the things that happen before you file.
Chances are you’re facing dire financial circumstances if you’re considering bankruptcy. You likely receive multiple calls each day from bill collectors, and there’s even a chance you’re dealing with the threat of foreclosure.
No matter what served as the final straw that made you decide to move forward, once you file for bankruptcy you’ll be able to breathe a sigh of relief.
Before officially filing, you’ll need to do two things. First, you’ll meet with an attorney to discuss your situation. He or she will advise you on whether or not to file, when it’s best to file, and how to go about filing. Then, you’ll participate in an education course that helps you assess whether filing is truly your best option. In order to file you’ll need to show proof that you participated in a bankruptcy counseling session.
Once you make the choice to file for bankruptcy, you must determine which type is best for you. In most cases, you’ll be choosing between Chapter 13 and Chapter 7. You and your attorney will discuss the bankruptcy means test, which determines which whether or not you are qualified for Chapter 7 bankruptcy. If not, you’re next best choice is to file for Chapter 13.
Though there are many factors that play a role in determining if Chapter 7 or Chapter 13 is best for you, the general thing to understand is that Chapter 13 bankruptcy is a restructuring of your debt that allows you to make payments toward the debt, so you’ll need a source of income. Both types of bankruptcy can allow you to protect your assets, but Chapter 13 provides greater flexibility.
Paperwork and Filing Fees
Bankruptcy paperwork can be complicated. Perhaps most intimidating is that if it’s not filled out properly, you’re at risk for jeopardizing assets, not to mention having your case denied completely. And just recently, in December 2017, the federal government made some updates to certain bankruptcy forms. This was done in an effort to create consistency and transparency, but for some, it’s made the process of filing even more complicated.
If you’re filing for Chapter 13, this will be the time when you develop and submit for court approval a repayment plan. Your attorney will help you create one that meets court requirements and is something you’ll be able to afford.
The other thing to consider when you file for bankruptcy is the cost. Many people are surprised to learn that filing comes at an expense. It’s understandable – people who file are experiencing financial problems, so why would they want to spend money to file for bankruptcy?
However, like most things that involve the court system and the government, there’s a fee. You’ll not only need to pay attorney’s fees when filing, you’ll need to pay the court to process your paperwork.
Expect to pay approximately $1000 to file for bankruptcy, give or take a few hundred dollars. You might need to save up or borrow from a loved one to cover the cost of filing for bankruptcy, but for many people, the cost is well worth the end result.
Meeting of Creditors
Once you’ve filed for bankruptcy, much of what happens next is out of your hands. You’ll be required to attend a 341 Meeting of Creditors, which is an opportunity for the creditors you’ve named in your bankruptcy to dispute the case. If you’ve filed for Chapter 7, they’d be disputing the discharge of their debt.
In most cases, the Meeting of Creditors sounds much worse than it actually is. You’ll need to state your case for why you’re filing, but most creditors don’t even bother attending. And your attorney will be with you, so if any do you’ll have someone in your corner helping you defend your case.
After any issues that are raised during the Meeting of Creditors are settled, the bankruptcy trustee can begin liquidating your assets, if you’ve filed for Chapter 7. If you’ve filed for Chapter 13, you’ll begin the payment plan you proposed when filing.
That’s it. You’re bankruptcy is not complete, but aside from abiding by your repayment plan in Chapter 13, you’ve likely met all of your obligations for filing. It can take some time for the trustee to complete the case, but if things seem to be stretching on for too long, your attorney can contact the court and hasten the finalization of the process.
What to Know When You File for Bankruptcy
The most important thing to understand when you file for bankruptcy is that your attorney is an invaluable resource. Too many people attempt to go it alone when filing, which is almost always a mistake. It is possible to file without the assistance of an attorney, but the rate of dismissal is much higher because those without experience dealing with the court tend to make mistake.
Even if your intentions are good and you’re simply trying to avoid the extra expense of an attorney, you’re better of contacting someone who is an expert and has experience dealing with the bankruptcy court.
If you’d like to know more about what happens when you file for bankruptcy, we can help. For more information or to schedule a consultation to discuss bankruptcy and how it might help you, contact us at 1.800.220.4318.