Learning how to file for bankruptcy is not an impossible task. The first step is to go to the bankruptcy court website and learn as much as possible. Many forms can be printed from the internet, and clear instructions are given to accomplish filing tasks in person as well. Assuming a person is going to make a claim for either chapter 7 or chapter 13, here is what is involved.
Definitions
A chapter 7 bankruptcy is a liquidation, with some exceptions. If the claimant forgets to list debts or has federal loans, these items will not be discharged. Taxes will certainly continue to be a burden; as will child support, alimony or payments in criminal negligence cases.
Chapter 7 is a great way to eliminate unmanageable consumer debt. Before a person can claim such insolvency, they must pass a mean’s test to be qualified to file. If approved, the process begins by submitting a petition of their claim with extensive details about the debts owed, personal and business assets and income sources.
In general the petition must note all creditors and the amounts owed to them. They will also file a schedule containing current earnings and any projected changes to earnings in the future, and a detailed list of living and business expenses, if applicable. All debtor real estate must be listed on a separate schedule, as well as any source of passive income from investments, etc. Copies of tax returns from recent years will be required by the case trustee as proof of the claimant’s financial status.
When the majority of creditors are comprised of consumer credit providers, an additional step must be completed. Consumer debtors are required to complete an approved form of credit counseling within 180 days before their bankrupt claim. This step is completed in accordance with new regulations hoping to encourage alternatives to liquidation.
Married couples making a claim will have to turn in all the forms required of an individual, even if they decide to file jointly. This rule is in place to ensure that accounts set up in different names are included in the documentation. All forms can be purchased where they are sold, or printed from pdf documents; but they are not sold at the courthouse. The total courts costs for filing a chapter 7 bankruptcy without attorney’s fees adds up to a few hundred dollars.
Chapter 13
This form of bankrupt claim has similar filing requirements and court fees. Unlike the previous claim, chapter 13 is a court-supervised payment plan which must be completed in order to discharge the debts. As with liquidation, claimants need to file petitions detailing all debts, assets and liabilities, earnings or business revenue and a statement of their financial status. Credit counseling is required for this plan as well.
Under both petitions, collection attempts are subject to automatic stays enforced by the courts. Under chapter 13, all payments are collected and distributed by the case trustee. The debtor only needs to make every payment on time until the plan is complete.
Learning how to file for bankruptcy is possible, and the education gained in the process may keep the individual debt free for life.
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