In general bankruptcy options include: Chapter 7 or straight bankruptcy, Chapter 13 which is a restructuring plan, or Chapter 11 which is a business reorganization plan. Depending on your situation, any of these options may be considered to help get your debts under control and your financial life back on track. An experienced bankruptcy attorney can examine your financial situation and determine if bankruptcy is necessary and if so which plan would best meet your needs.
The first step to filing bankruptcy is to file all the necessary paperwork called a bankruptcy petition in the local bankruptcy court. Bankruptcy is a legal process and that can be time consuming and complicated. It is a process that can be done on your own, however most debtors choose to seek legal counseling and use a bankruptcy lawyer.
The goal of the bankruptcy petition is to layout a plan which allows a debtor to manage their debt according to their ability to pay. In a Chapter 7 bankruptcyit is not unusual for a debtor to show that he or she has no ability to repay creditors after reasonable living expenses are considered. In a Chapter 13 bankruptcy a repayment plan, that allows the debtor to pay off their some or all of their debts over a period of years is filed along with the bankruptcy petition.
After the completion of your paperwork and filing of the bankruptcy petition all of your creditors can be notified that you are seeking bankruptcy. Filing bankruptcy means creditors will not be allowed to continue trying to recoup debts against you. The automatic stay will stop foreclosure proceedings against you. Additionally, payment plans outlined by your bankruptcy attorney will begin if you have filed for Chapter 13 bankruptcy. A trustee will work with you and your creditors to review all of your information and insure that the creditors are paid properly. After all the preliminary paperwork is finished a 341 Meeting of Creditors will occur. The 341 meeting is a short informal meeting attended by a trustee, your attorney, creditors, and you. Your bankruptcy attorney will fully prepare you for this meeting by discussing all the questions that will be asked and the process for the meeting. This meeting is generally very short and non-adversarial.
In 2005, additional requirements were added to the Bankruptcy Code that made filing bankruptcy more difficult. Some of the changes are:
- a requirement that anyone wishing to file bankruptcy must complete a certified credit counseling program
- more strenous testing of a debtors ability to repay some or all of their debts
- removal of the "Superdischarge" provision Chapter 13
- and many others changes
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Bankruptcy can lower your credit score, make it difficult to get loans, and reduce some employment opportunities.
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