Filing for bankruptcy can be a complex and emotional process, but it can also provide a fresh financial start. If you're considering bankruptcy and want to know more about the process and what to expect, here's an overview:
Types of Bankruptcy
In the U.S., individuals primarily file for two types of bankruptcy:
Chapter 7 Bankruptcy
Description: Often called "liquidation bankruptcy," it involves the sale of non-exempt assets to repay creditors.
Eligibility: Requires passing the means test, which assesses your income and expenses to determine eligibility.
Process: Typically takes a few months. Once completed, most unsecured debts are discharged, meaning they are wiped out.
Impact on Credit: Stays on your credit report for 10 years but can start improving your financial situation immediately.
Chapter 13 Bankruptcy
Description: Known as "bankruptcies near me," it allows you to keep your assets and repay debts over a 3 to 5-year period.
Eligibility: Available to individuals with a regular income and unsecured debts less than $419,275 and secured debts less than $1,257,850 (as of 2021).
Process: Involves creating a repayment plan, which must be approved by the court. Once completed, remaining eligible debts are discharged.
Impact on Credit: Stays on your credit report for 7 years but can be less damaging in the long term compared to Chapter 7.
Benefits of Filing for Bankruptcy
Debt Relief: Eliminates or restructures your debts, giving you a fresh start.
Automatic Stay: Stops creditors from collection actions, including lawsuits, wage garnishments, and phone calls.
Asset Protection: Exemptions allow you to keep essential property and assets.
Credit Score Recovery: Provides an opportunity to rebuild your credit over time.
Drawbacks of Filing for Bankruptcy
Credit Impact: Significantly affects your credit score and stays on your credit report for 7-10 years.
Public Record: Bankruptcy filings are public records.
Loss of Property: In Chapter 7, non-exempt assets may be sold to pay creditors.
Financial Restrictions: May have difficulty obtaining new credit or loans immediately after filing.
Finding a Bankruptcy Attorney Near You
Research and Reviews
Look for attorneys with positive reviews and strong reputations.
Check their experience in handling bankruptcy cases similar to yours.
Consultations
Many attorneys offer free initial consultations. Use this opportunity to ask questions and understand their approach.
Costs and Fees
Discuss the attorney's fees upfront and any payment plans available.
Understand the total cost involved in filing for bankruptcy, including court fees.
Credentials
Ensure the attorney is licensed and in good standing with the state bar association.
The Bankruptcy Process
Pre-Filing
Credit Counseling: Complete a credit counseling course from an approved provider within 180 days before filing.
Gather Documentation: Collect financial documents, including income, expenses, debts, and assets.
Filing
Petition: File a bankruptcy petition with the court, along with schedules of assets, liabilities, income, and expenses.
Automatic Stay: An automatic stay goes into effect, stopping most collection actions.
Post-Filing
341 Meeting: Attend a meeting of creditors, where the bankruptcies near me trustee and creditors can ask questions about your financial situation.
Education Course: Complete a debtor education course before debts can be discharged.
Discharge
Chapter 7: Typically within a few months after filing, eligible debts are discharged.
Chapter 13: After completing the repayment plan, remaining eligible debts are discharged.
Conclusion
Filing for bankruptcy is a significant decision that requires careful consideration. Understanding the types of bankruptcy, the benefits and drawbacks, and the process can help you make an informed choice. Seeking the assistance of a qualified bankruptcy attorney can provide the guidance and support needed to navigate this challenging process.
