What to Expect When You File For Bankruptcy
If you find yourself owing a lot of money to your creditors, either by way of secured or unsecured loans, then you could file for bankruptcy - and start your financial life all over again.
Below are the steps that you will need to take in order to get your life back on track.
What Do I Do First?
Once you realize that there is now way out, and your creditors are after you to get their money back (which you do not have), then you should get in touch with an experienced bankruptcy attorney. They will first review your financial status, and then help you to file a petition in bankruptcy court.
You can file for bankruptcy under Chapter 7 or Chapter 13. In Chapter 7, your non-exempt assets can be disposed of by a trustee appointed by the court, and your creditors will be paid that money.
Your unsecured debts can be discharged under this chapter, and you will get a fresh lease of life in just 4 months.
Certain obligations such as alimony, child care, secured debts and certain taxes cannot be discharged.
In a Chapter 13 bankruptcy, you can reschedule your debt payments and pay off the balance within a period of 3 to 5 years.
Your bankruptcy attorney will submit a written plan to the court regarding your repayment schedule. The advantage of filing Chapter 13? It will let you remain in control of your financial life - and you will also retain possession of your assets.
If you realize that bankruptcy is a viable option for you, then time is of the essence.
What Will The Court Do?
If you are filing for bankruptcy under Chapter 7, the bankruptcy court will put you through a “means test”, in which your gross income for the six months prior to filing for bankruptcy is calculated and compared to the average median income of a similar sized family in your area.
If your income is lower than the median income, then you will qualify to file under chapter 7. If not, your bankruptcy attorney will need to file under Chapter 13. Once you have filed under the relevant chapter, the court will appoint a trustee.
The trustee will start compiling a list of all your non exempt assets, which will be disposed of in order to pay your creditors.
If you have filed for bankruptcy under Chapter 13, the trustee will arrange a meeting with your creditors and present your repayment plan.
Once that plan is approved, the trustee will also monitor your payments; it is essential that you do not go back on your written word.
What Happens After the Bankruptcy is Filed?
Once the court has approved the Chapter under which your bankruptcy case is filed, then you will need to follow the lead of your trustee.
If your bankruptcy attorney filed under Chapter 7, then the trustee will dispose of all your non-exempt assets and pay off your creditors. If you have filed for bankruptcy under Chapter 13, then you will need to ensure that you pay your debts in accordance with the new repayment plan.
You will need to keep an eye on your expenses in the coming 3 to 5 years as you get your financial matters back on track.
Needing to file for bankruptcy is no reason to be disheartened. View it as another chance given to you by the court to get your financial life back in order. After all, everyone is entitled to a second chance.
Aren’t you?