about personal bankruptcy: What You Need to Know

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What You Need to Know about Personal Bankruptcy: Filing

The decision to file for personal bankruptcy is a difficult one, and people who are being consumed by debt will live with effects for years to come. Because of new laws, differences between chapter 7 and 13, exempt property, dischargeable debts, and other complex issues surrounding personal bankruptcy, someone facing the process alone can easily be overwhelmed. Here’s a look at the process of filing for personal bankruptcy.

The first step should be to determine if you really need to file for bankruptcy and you have exhausted all of your other options. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 mandates that those considering filing for personal bankruptcy receive credit counseling. This way, all of your options can be discussed. You may find that you can avoid bankruptcy. If not, then you will then be able to proceed.

You will then have to determine which form of bankruptcy you will file for. Chapter 7 is also known as “straight bankruptcy,” which eliminates all dischargeable debts, while chapter 13 involves reorganization and repayment of debt. Your specific situation may make one a more viable option.

Next, you will have to gather financial information, such as tax returns for the last two years, property deeds, car titles, loan papers, information on secured and unsecured loans, and pay stubs. Then begins the long process of filling out forms, or schedules, which detail your financial history for the last two years. The forms are available online and in bankruptcy kits. If you choose to purchase a bankruptcy kit, make sure it is legal and valid in your state and has the most current forms.

You will have to put the information and documentation together in order to file your bankruptcy petition with the local bankruptcy court. (You can find your local bankruptcy court by going to uscourts.gov). After the petition is filed, you will need to contact your creditors to inform that you are filing for personal bankruptcy. This is important because once you have filed, they are no longer allowed to contact you or to collect money from you. During personal bankruptcy proceedings, you will have to meet with creditors and/or their attorneys. These are known as 341 meetings or the First Meeting of Creditors, and creditors are not required to come, but your attendance is mandatory. You are questioned about your finances and debt by the trustee. If creditors are present, they also may question you. You are also required to receive credit counseling within 180 days of filing for personal bankruptcy.

The court will appoint a trustee for you, whose job it is it make sure all financial information is gathered and accurate. The trustee also liquidates your assets and disperses them to creditors. In chapter 13 bankruptcy, trustees also oversee the repayment process and makes sure you pay your creditors according to the reorganization plan. The trustee also works for you by ensuring that the creditors do not harass you or violate the bankruptcy agreement.

Usually, the court will discharge applicable debt four to six months after the 341 meeting. Until that time, you still have the option of backing out of the proceedings. After the proceeding, your debts will either be discharged or reorganized, depending on which type of bankruptcy you filed for. In either case, it is essential that you immediately start rebuilding your credit. Though personal bankruptcy stays on your credit report for up to ten years, you can begin to rebuild by paying your bills on time and paying off any debts that were not discharged.

Because of the complexity of filing for personal bankruptcy, you should contact a lawyer who specializes in the field. They can help you with the whole process, as well as with obtaining credit counseling. Bankruptcy lawyers usually charge a flat fee, which may well be worth it if you can eliminate some or all of your debt. Before you commit to bankruptcy, however, make sure you have exhausted your other options. Debt settlement, for instance, can help reduce your debt without the serious ramifications that bankruptcy holds.