How To File Bankruptcy

The best advice as to how to file bankruptcy will be provided by a bankruptcy lawyer. A lawyer that specializes in the field of bankruptcy will be able to advise you as to your eligibility to file suit. He or she can also guide you through the process of presenting your case to the court and notifying your creditors.

Bankruptcy is defined as the inability to repay the debts that you have incurred. When your bills have grown to such a level that you will be unable to pay them with the income you make, you have the option to declare bankruptcy. When you declare bankruptcy, you are able to eliminate the debt that you owe and start fresh.

Downsides

There are some down sides of filing bankruptcy. The biggest downside is that your credit history will be scarred for up to ten years. The credit bureaus will note your credit file that you have declared bankruptcy in the past. Often times, this will have a detrimental effect on your ability to receive credit in the future.

Types of Bankruptcy

For individuals, there are two different types of bankruptcy for which you can apply: Chapter 13 and Chapter 7.

• Chapter 13 bankruptcy is a proceeding that sets up a schedule for repayment with your creditors to eliminate your debt. This is only done in cases where you do have the ability to repay your debts in a reasonable period.
• Chapter 7 bankruptcies are performed in cases where your debts are satisfied by the liquidation of your assets and those proceeds used to repay your debts. Any assets that you own are available to be liquidated except a defined list of property defined by law.

Eligibility to File

You also need to be aware that there are special rules as to how to file bankruptcy. The bankruptcy laws have been overhauled since 2000, to restrict the type of suit you can file.

In order to file a Chapter 7 suit, you must pass the “Means test”. This establishes whether you have the means to repay your debts or not. To declare Chapter 7, you will have to demonstrate that there is no way you can pay back your debts and still have enough money to reasonably live on.

Many individuals who would have been filed as Chapter 7 in the past are no longer permitted to choose Chapter 7 and are required to file Chapter 13 instead.

How To File Bankruptcy

You have the choice to file a bankruptcy suit on your own or by using a lawyer as your representative. A lawyer will advise you on how to file bankruptcy and will guide you through the process so it is usually a good idea to hire one.

The process of filing has many steps and requires you to do certain procedures to bring the suit to court. All of your creditors must be notified of your intent and be notified as to the date your case will be brought before the judge. They then have the right to come and argue their claim on your assets.

The guidance and representation you can obtain by hiring a lawyer to represent you is well worth the money if things become difficult in court.

The Process

Once the proper forms have been filed and the suit is brought before a judge, you must appear at the hearing and answer questions regarding the accuracy of the information on the forms filed in the suit and await the judge’s decision on whether the court will approve the action or deny it. A trustee is appointed by the court for your case. The trustee will handle the sale of the assets and distribution of the proceeds to your creditors.

The process of Chapter 7 bankruptcy requires that your creditors accept the portion of your assets that the court determines they are due. Typically, after the sale of your assets, the total proceeds are distributed proportionately to your creditors by your trustee.

The amount you pay back will be less than you actually owe your creditors in most cases. Still, once the creditors have received their payment they are required to wipe your debt clean. You have a clean slate from that point forward. Your credit history will, however, contain a a record of the bankruptcy on your file for up to ten years.

Once the trustee has finished his job, the case is settled and you are free to begin building a new life and credit history. After you have successfully filed bankruptcy, you cannot file again for between seven to ten years.