9 Tips in Filing a Bankruptcy

Posted: May 7, 2012 in Personal Finance

Bankruptcy can be a very painful process. However, these laws are placed for consumer protection. Here are some of the things that you need to expect when going bankrupt.

Bankruptcy should be a last resort.

A bankruptcy remains in your credit history for ten years. According to the United States Bankruptcy code, counseling should be done prior to approval of any bankruptcy case. This is done to provide consumers with alternatives to filing a bankruptcy case.

Understand the two types of bankruptcy.

The most common type is Chapter 7 which is a form of liquidation bankruptcy. On the other hand, Chapter 13 is more of a repayment plan for consumers. Today, it is pretty difficult to get a Chapter 7 bankruptcy because of the means test.

Know your options when filing a bankruptcy.

A lot of people choose to file bankruptcy without legal help. However, it is highly recommended that you seek the help of a lawyer. People who choose to work with big firms often find themselves working with a paralegal instead. Find a firm that offers direct contact with a lawyer.

Meet with your lawyer and go over the case.

A good lawyer should be able to assist you with all your questions. Based on your financial affairs, your lawyer will determine which type of bankruptcy is best for you. Your lawyer will also assist you with answering the BAPCPA’s means test.

Know how much it cost.

Fees usually vary from one professional to another. Some lawyers charge for a flat fee while others will based it on the total amount of debt you have. It is best to go with the latter. There are also lawyers who will let you pay in installments and will file your case with a deposit. On average, the legal fee is $1,700 but this can vary depending on your geographic location. There will also be court filing fees.

Refer creditors to your lawyer’s office once he or she has been retained.

Say goodbye to those fairly annoying calls. As soon as your attorney has filed the case, no creditors should be calling you about your debt. This rule stays enforced and creditors can be liable if they don’t follow it. Any willful violation of the automatic stay may result in damages against the creditor, including lawyer fees and punitive damages.

Wait for a creditor meeting.

As soon as your lawyer files the case, you will be notified about the date of your 341 meeting or creditor meeting. This is a very important part of the process. Before the meeting, review all files with your lawyer. This meeting will allow the trustee to ensure that you have been truthful about the case.

For Chapter 7 bankruptcy, the trustee will determine whether there are assets that can be liquidated and if it can be used to pay creditors.

If they determine that your assets are exempt, a no distribution report will be filed in the court. If you still have non-exempt assets, they will be sold and paid to your creditors. For a Chapter 7 case, you may never have to pay all your creditors back. For Chapter 13, consumers are required to go into a three to five year plan that will pay creditors with as much as your income can.

Creditors are given 60 days or less to challenge the discharge of debts.

When there are no lawsuits, you will receive a debt discharge for Chapter 7. A discharge means that you don’t have to repay discharged debt and that creditor should never collect money from you anymore. Whether or not your debt will be discharged, it will all depend on the Bankruptcy Code provisions.


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