How does the bankruptcy process work?



How does bankruptcy work?
The bankruptcy process is complex and relies on legal concepts like the "automatic stay," "discharge," "exemptions," and "assume." Therefore, the final chapter of this publication is a glossary of Bankruptcy Terminology which explains, in layman's terms, most of the legal concepts that apply in cases filed under the Bankruptcy Code. The first part of the bankruptcy filing process is collecting all of your personal financial information. This will include a list of all your secured and unsecured debts (you might find ordering your credit report helpful), tax returns for the last two years, deeds to any real estate you own, car titles, and any other loan documents you may have. Then either your attorney, or yourself if decide to file without the help of an attorney, will need to complete the bankruptcy forms. These forms, collectively are referred to as the schedules and ask you to describe your current financial status and recent financial transactions (usually within the last two years). If you are filing a Chapter 13 bankruptcy, a proposed repayment plan must also be submitted with your petition. Once the bankruptcy petition is completed you will need to file the petition with your local United States bankruptcy court. The fee for filing a chapter 7 bankruptcy is $200 and the fee for a chapter 13 bankruptcy is $185.


There are 2 different kinds of bankruptcy that you can apply for, a Chapter 7 and a Chapter 13. A chapter 7 is often referred to as a liquidation bankruptcy. In short...you give up everything, including your car (don't know if that applies to cars that have been paid off in full). In order to qualify for this you must pass a "means test". A chapter 13 is the most common type of bankruptcy because you're not required to give up any tangible property or your car. In this bankruptcy all of your debts are grouped together and you pay them off over a 3 - 5 year period of time. The best thing you could do is start living within your means. Figure out your monthly expenses. Deduct it from you husbands take home pay. Any thing above that amount means you are living to high for what you are making. Do bankruptcy is a lot more unpleasant than you think. Call your credit card companies and ask for a rate reduction. It your rent is to high, move. At the other end, your husband can work a second job or you can work on the weekends.

It is always better if you don't have to file the bankruptcy. A Chapter 7 bankruptcy law will wipe the slate clean, but it can take a long time to reestablish your credit. Also, they've changed the laws quite a bit and now you have to fall within income guidelines or you will only be able to file a Chapter 13. A Chapter 13 could help you considerably if you have several assets, such as a home and cars. You make payments to your creditors through the Chapter 13 Trustee who is appointed to you through the court. However, if you don't have many assets, this isn't the way to go ... it's just as detrimental to your credit rating as the Chapter 7. Try contacting consumer credit counseling first to see if they can help. If not, contact a Bankruptcy attorney. Many of them offer free initial consultations.