9 Steps To Declaring Bankruptcy

Posted on: 10 August 2018

At some point in the future, you might find your credit situation isn't getting better, and creditors are threatening to sue you or take away some of your assets. In such cases, it's a good idea to consider filing for bankruptcy.

If you're filing for Chapter 7 Bankruptcy, there are approximately nine steps to follow.

Step 1: Credit Counseling

Before you file for bankruptcy, you're required to get credit counseling in the six months leading to your application. The agency offering the counseling must be one approved by the US Trustee's Office. Without counseling, your case will be dismissed.

Step 2: File the Petition

There are a number of forms that your bankruptcy lawyer must file in court for the process to begin. These forms include the bankruptcy petition, schedules with your financial information, a form with your expenses and income, etc. You'll also need to claim property exemptions on the forms. A stay of collections will be issued.

Step 3: Trustee Takes Over

There will be a court-appointed trustee who will take over your case after you've filed the paperwork. They will review the paperwork and start distributing the nonexempt property to creditors. You'll also have to submit a copy of the most recent tax return to them.

Step 4: Meeting of Creditors Takes Place

The court will inform you when the meeting of creditors is supposed to take place. During this meeting, you'll be answering questions about your finances under oath. The questions are fielded by your creditors (if they show up) and your trustee.

Step 5: Eligibility is Confirmed

The court will make a decision on whether or not you qualify for chapter 7 bankruptcy. This usually follows the gathering of all necessary information and its review by the trustee. If you fail the means test, this may mean having to file for Chapter 13 bankruptcy.

Step 6: Nonexempt Property is Seized

Any property that isn't exempted is seized, sold, and the returns distributed to the creditors.

Step 7: Deal with Secured Debts

Secured debts are backed by collateral. The collateral can be seized if you default unless you pay the creditor what the collateral is worth or reaffirm that you'll pay the debt even after the case is over.

Step 8: Take a Financial Management Course

You'll be required to take a debtor's education course.

Step 9: Bankruptcy Discharge

This will come three to six months after the time you filed, and the case be closed a few days or weeks later.

For more information, contact your local bankruptcy filing service.