With a state of financial uncertainty and little clarity or confidence in what the future may hold, bankruptcy is a concept many of us may be forced to familiarize ourselves with. The process may seem intimidating to the uninitiated, but with the right support and advice by your side, bankruptcy can be the key to a smooth, stress-free future.
Is It Easy to Go Bankrupt?
Filing for bankruptcy involves just a few simple steps:
- Analyze the Debt: Particular chapters of bankruptcy cannot erase some debts, so make sure you have a comprehensive list of everything you want to cover. Remember that some debts might not be on your credit file, so you may have to dig deep to get a complete picture.
- Consider Exemptions: In many cases of bankruptcy, particularly Chapter 7, your property and assets will be sold with the profits used to pay creditors. There are, however, exemptions, so make sure you are fully aware of what you will have to give up and what you can keep.
- Determine Eligibility: Different forms of the process have different requirements, including means tests. It is essential to have all of the facts before you proceed.
- Reaffirm, Redeem, or Surrender Any Secured Debts: If the property has been pledged as collateral for a loan, continuing to pay the creditor may allow you to retain the property. You can usually choose to redeem the property by paying a lump sum to take possession outright or reaffirming that you will continue to pay under the same terms. You can also surrender the property to the creditor.
- Complete the Forms: There are specific forms to complete to file for bankruptcy, which will collect data such as details of the debt, income, expenses, and exemptions. It is best to work with an attorney to ensure that everything is included and completed correctly. Before filing, you will also be required to complete a credit counseling course.
- File the Petition: A bankruptcy petition consists of the main form, schedules, and other forms. Filing this petition officially kicks off the case and starts your bankruptcy proceedings. At this point, you will also be required to pay the necessary fee or request an installment plan from the courts.
- Submit Documents to Trustee: To prove the accuracy of the details captured in the bankruptcy forms, you will be required to provide evidence. This may include profit and loss statements, tax returns, paycheck stubs, and bank statements. These documents will usually be presented during a short meeting with the trustee.
- Settle Objections or Secured Debts: In some cases, you may wish to dispute a creditor’s claim or eliminate certain liens. These need to be addressed before the case is closed, so ensure you have the necessary details and evidence in hand. As part of the bankruptcy forms, you must state how any secured debt will be dealt with. Again, these need to be handled before the case is closed, for example, handing back a vehicle or signing over property.
- Complete a Debtor Education Course: Once the paperwork is filed, you will be invited to attend a debtor education course—this must be completed before your discharge is received and the debt wiped. You will need to submit your certificate to the court as proof of completion.