Bankruptcy provides a path out of unmanageable debt and helps consumers start over with a clean financial slate. But the decision to file is a major one. Bankruptcy is, after all, a legal process that involves multiple steps and specific rules and regulations. Below, learn more about this process with an overview on how to file.

Decide Which Type of Bankruptcy to File

The first step is to determine whether Chapter 7 or Chapter 13 bankruptcy is more appropriate for your financial situation. Chapter 7 eliminates most types of unsecured debt, while Chapter 13 restructures debts into a long-term repayment plan. Chapter 7 is better for filers with little or no income; Chapter 13 works well for filers who have enough money to put toward their repayment obligations each month.

Pass a Credit Counseling Course

Both Chapter 7 and Chapter 13 filers must pass an approved credit counseling course before proceeding with bankruptcy. The course guides filers through a review of their debts to see if bankruptcy is the best option. At the end, you will receive a certificate of completion that must be filed with your bankruptcy petition in the courts. Without this certificate, the courts will dismiss the entire case.

Complete & File Forms

Bankruptcy filers must complete a number of forms, including a court petition, schedules of financial information, and a comprehensive list of assets, income, and expenses. This information ensures the court has all the details they need, while confirming that you can pass a means test; a means test confirms that the filer does not exceed the income thresholds for Chapter 7 or 13 and, in the case of Chapter 13, the debt limits as stated by bankruptcy law.

Liquidate & Repay Debts

Once the paperwork is filed, the court appoints a bankruptcy trustee to liquidate eligible assets to repay creditors in a Chapter 7 case. For Chapter 13 filers, eligible assets may be liquidated to repay a part of the outstanding balance. This is also the stage where the fate of secured assets, those backed by collateral, are managed; you may decide to return the property, keep it and pay the creditor for its value, or agree to retain the asset and continue to pay it off after bankruptcy.

Pass a Financial Management Course

During the financial management course, a filer learns to design a feasible budget, identify past spending mistakes, and discover ways to make sounder financial decisions moving forward. The course is brief and can be taken online, and a certificate of completion must be filed with you petition.

Receive a Final Discharge

Finally, all eligible debts are discharged. In Chapter 13, the repayment plan is either approved or denied by the courts.

 

Having the support of an attorney is crucial to navigating bankruptcy. Sam Turco Law Offices in Omaha, NE, has been representing clients throughout the state since 1992. They offer legal assistance at every step of filing for bankruptcy, from initial consultation to final discharge. Call (402) 614-7171 or visit their website to schedule an appointment.