Filing for bankruptcy is usually the last decision most people make when they are drowning in debt and do not see a way out. It is a form of rebirth that offers individuals a chance to start afresh and rebuild what they may have lost.
However, the process doesn’t happen overnight. It can take months, sometimes years, before you can be discharged of all debt.
If you’re seriously considering taking this bold step, bankruptcy attorneys can help. Half a million people file for bankruptcy each year, and the cases with the best outcomes are those with solid bankruptcy attorneys.
The Big Question: Is Filing Bankruptcy Really Your Best Option?
Filing for bankruptcy can give you a break from debt collectors right away. That’s because there’s a law called the automatic stay that stops them from contacting you once your case starts. It also means any wage garnishments (money taken from your paycheck to pay debts) will immediately stop.
Certain things, like child support, alimony, and recent taxes, can’t be erased through bankruptcy. Also, if you co-signed for someone else’s loan, bankruptcy won’t protect them.
Getting rid of student loan debt through bankruptcy can be tricky. For federal loans, there are specific situations where it might be possible in a Chapter 7 case. Private student loans can also be discharged, but it’s usually best to get a lawyer’s help because the process is complicated.
Even if you have good credit when you file for bankruptcy (Chapter 7), your score might go down a bit for a while. The good news is that most people can rebuild their credit and have a better score within a year of getting their bankruptcy discharge.
Steps on How to File for Bankruptcy
Here is a detailed roadmap for filing bankruptcy:
1. Meet a Lawyer
Schedule a consultation with a bankruptcy lawyer. You’ll discuss your financial situation and explore your options. If bankruptcy may not be in your best interest, your lawyer would advise you to take action or even devise another roadmap for you.
This is why it is important to hire a competent attorney who not only cares about the money you’re offering but also about you as a person.
2. Gather Your Paperwork
This might include proof of income (pay stubs, tax returns), a list of your debts (credit card statements, medical bills), and information about your assets (car, house).
3. Choose Your Path
Chapter 7 or 13? Chapter 7 is generally quicker and eliminates most unsecured debts (credit cards, medical bills). However, you might have to sell some assets to pay creditors. Chapter 13 involves a repayment plan that lets you keep your assets, but it takes longer (usually 3-5 years).
4. Consider Credit Counseling
You’ll need to complete a credit counseling course approved by the Department of Justice, both before and after filing for bankruptcy. These courses will educate you about managing your finances.
5. File the Paperwork
There are various forms involved in filing for bankruptcy. Your lawyer can help ensure everything is filled out correctly to avoid delays or rejection.
6. Meet the Creditors
The court will schedule a meeting where you’ll answer questions from a court-appointed trustee and possibly your creditors about your finances. This can be stressful, but usually creditors don’t attend this meeting.
7. Waiting for Discharge
The timeframe for your debt discharge depends on the chapter you filed under. Chapter 7 discharges typically happen within 4 months, while Chapter 13 requires completing your repayment plan (3-5 years) before your debts are wiped out.
Conclusion
It takes guts and courage to file for bankruptcy after losing all that you’ve worked hard for over the years. The process can be long and tedious, no doubt. But you do not have to take on everything by your side.
You need to hire an attorney with a track record of helping people like you get the financial blanket that bankruptcy offers. Even if bankruptcy is not your best course of action, a good lawyer will advise you on the next steps to take.
By Chris Bates
