How to Declare Bankruptcy

Bankruptcy can be the lifeline an individual, couple or business needs to get a fresh start and apply the life lessons that lead to financial hardship in the first place. There are a few things to know before anyone files for bankruptcy.

1. The first thing anyone considering bankruptcy should do is gather all the necessary documentation from the previous six month that will be needed to prove financial hardship. That includes:

  • All utility and service bills
  • A list of household expenses (past recites can help)
  • Bank statements, investment portfolios, progress reports from IRA's, 401k's, pension plans, etc.
  • Paystubs or proof of household income
  • All credit card and loan statements (secured and unsecured)
  • Last tax return

After all this information is gathered a list should be made of all secured debts and household expense. This will give an accurate portrait of how much is needed to cover basic living expenses. Only the essential expenses should be included to get a clear understanding of the amount necessary to live. No luxury or expendable expenses should be included. The mortgage and car payments should always be at the top of the list (pay those first). Another list should be made of the unsecured debts and the expense of having such debt (interest rates, late fees, over limit charges, annual fees).

2. Consult with a skilled and experienced bankruptcy attorney. He/she is trained to help with the process of filing and can answer any questions relating to bankruptcy and the Bankruptcy Code. A bankruptcy attorney can explain which chapter of bankruptcy is best for any particular situation and the best way to protect assets. He/she can also explain what property can be exempt from creditors and to work with the court appointed trustee. He/she can explain when is the best time to file according to the particulars unique to each case. Anyone filing for bankruptcy must enroll and complete a credit counseling course and a money management course. The bankruptcy court will consider any financial plan worked out in the credit counseling course as an alternative to bankruptcy.

3. The actual filing of bankruptcy in bankruptcy district court. All bankruptcy situations are different but all filings require a mountain of paper work to be filled. Some case may require 50 pages of documents others may require 100 pages of documents. Some states have state specific laws that may apply, other states let the debtor chose if they want state or federal laws to apply to their case, and still other states only apply the Federal Bankruptcy Code. Once this mountain of documentation is filed with the court, the bankruptcy trustee and the creditors will pour over them to determine if the debtor is eligible for bankruptcy. At this point all creditors listed in the bankruptcy must cease to contact the debtor. The trustee and the creditors will schedule a Creditor's Meeting and the Bankruptcy Court will notify the debtor of the meeting. The trustee and the creditors will review the case and make a decision on the financial situation of the debtor including buy back options, discharge of debt, objections, ineligibility, etc.

4. Final verdict on the case will come shortly after that. The whole process will take six to eight months, some cases take longer than others depending the chapter filed, local laws, objections by the creditors, agreements worked out, etc.

If you are experiencing financial hardship and want to know how to declare bankruptcy, contact a bankruptcy attorney in your area today to start the process and make a fresh start!

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