The decision to file for bankruptcy should be made only as a last resort, as it comes at a high cost regarding your future creditworthiness. Before filing you should determine whether enough of your debts would be discharged to make the process worthwhile. Generally bankruptcy filings are made by people who have amassed very high medical bills or debt from credit cards, personal loans, or auto accidents. These debts, among others, are legally dischargeable in Chapter 7 bankruptcy. [2] X Research source Understand that Chapter 7 bankruptcy will allow a court to seize your assets to meet the demands of creditors. Possessions like your home, retirement funds, public benefits, professional tools, and certain personal possessions are protected and cannot be seized. Be prepared, however, to let go of certain non-essential or discretionary items such as sports cars, large-screen televisions, and high-end jewelry. Property exempt from seizure can vary by state, so be sure to check your state’s laws before deciding to file. [3] X Research source
Certain debts are not dischargeable through the Chapter 7 bankruptcy process. These include debt incurred in bad faith as the result of fraudulent or grossly negligent, pre-petition actions as well as certain tax and student-loan debt (in most cases). [5] X Trustworthy Source United States Courts Official website for the U. S. court system Go to source Check to see if your debts are covered under Chapter 7 bankruptcy before filing.
Many attorneys expect their fee to be paid right away. This is because bankruptcy proceedings may discharge outstanding legal fees. Filing without a lawyer is an option that’s much cheaper than filing with one. However, you should consider that a good lawyer can help persuade the court to settle more of your debts or better protect your personal property from seizure by the court. Even when filing pro se, (without a lawyer), you are still required to pay the $335 Chapter 7 bankruptcy filing fee as well as the cost of pre-filing credit counseling and a personal-finance-management class, each of which may cost up to $50. Should you decide to file for Chapter 7 bankruptcy without a lawyer, see How to File Chapter 7 Bankruptcy Without a Lawyer.
A schedule of assets and liabilities A list of current income and expenditures A list of all debts to be included in the bankruptcy An accounting of executory contracts and unexpired leases A schedule of exempt assets Per the revised bankruptcy code, a means test which is used by the trustee to determine possible abuse of bankruptcy law. You can find the appropriate forms online for free. [9] X Trustworthy Source United States Courts Official website for the U. S. court system Go to source The list of creditors, account numbers, addresses, and amounts owed should be as complete as possible to avoid problems after the bankruptcy. Creditors who are not notified by the court will attempt to collect despite the bankruptcy. Debts should also include any co-signed liabilities or outstanding guarantees even when a loan is in good shape. Otherwise, creditors may seek payment.
The bankruptcy trustee will oversee your filing process and is assigned to you after you file your initial documents. This trustee is not your lawyer or the judge but another official appointed by the court or your creditors to ensure that the bankruptcy process runs smoothly.
This meeting will be overseen by your Chapter 7 trustee. He or she will instruct you on what to bring to this meeting, but you will typically need the following documents: [13] X Research source copies of a recorded mortgage car titles property deeds bank statements tax returns pay stubs
Even though all debts are discharged, certain debts may be “reinstated” as the result of creditor pressure. If a debt is reinstated, it is no longer discharged but rather continues under the same terms as before the bankruptcy proceedings.
