Understanding the Bankruptcy Process

Bankruptcy is a federal legal proceeding for a person that is unable to meet their debt repayment obligation. This can happen for a variety of reasons, including job loss, divorce, or unexpected medical bills.  

As a bankruptcy lawyer  from a firm like Pioletti Pioletti & Nichols can explain, the most common types of bankruptcy are Chapter 7 and Chapter 13. Chapter 7 can wipe out your debt, while Chapter 13 puts you on a repayment plan over a three or five-year period. Bankruptcy can allow you a fresh start, but it will negatively impact your credit report. Showing a bankruptcy will affect your ability to obtain credit or a loan for many years to come. Because of these consequences, bankruptcy should be seen as a last resort.

If you are considering filing for bankruptcy, here are some of the steps you will need to take.

Gather Financial Documents

You will need to compile all your assets and debts as well as your income and expenses. Be very thorough, as this will be useful to anyone helping you during the process.

Attend Credit Counseling

Before you can file bankruptcy, you must attend counseling. You can find an approved list of counselors on the United States Court’s website and most are offered online or over the phone.

Complete and Submit Forms

Most people hire a bankruptcy lawyer to help them at this point, although it’s not required. Federal and state bankruptcy laws can be complex, and you will not receive counsel from the court. A lawyer can help you determine which Chapter for which you are eligible to file. You will need to pay a filing fee or apply for a waiver when filing the forms.

Meet with Trustee and Creditors

The court will assign you a trustee once your petition is accepted. They will review your financial documents and set up meetings with your creditors. Filing for bankruptcy can wipe out certain debts, but it will not discharge debts like child support, taxes, and federal student loans.

Complete Debtor Education

After filing, you will need to attend a debtor education course. This course covers personal financial management and gives you tools to manage your money better in the future.

Once you have completed the process successfully, the court will discharge your qualifying debts. You will no longer be legally obligated to repay those debts.

Most people filing for bankruptcy hire legal representation. The laws and processes are difficult to understand. If you don’t get something right, your petition can be thrown out. Contact a trusted bankruptcy lawyer to determine if it is the right step for you.