Deciding whether to file for bankruptcy protection and relief is a major decision but once you decide to choose this option to help resolve your financial issues, there are 5 simple steps for you to follow in filing a bankruptcy:
1. Use an Attorney to Determine Which Bankruptcy Option is Best for You
As a consumer, you can choose either Chapter 7 or 13, but you do have to qualify, which your attorney can determine. You also have to ensure that you can protect most if not all of your property after you file from being seized by the bankruptcy trustee as nonexempt property.
For example, if you are facing foreclosure or have a second house or non-homestead real property, a Chapter 7 filing is not going to prevent the foreclosure or save your second home from being seized and sold to satisfy the claims of creditors. Your attorney can discuss the option and benefit of a Chapter 13 and if your financial situation will qualify you and help you retain these possessions.
If creditors have valid challenges to your Chapter 7 filing, you may also want your attorney to seriously consider a Chapter 13 and if that can resolve these potential problems.
There may be other factors in your situation that your bankruptcy attorney must consider in determining which filing is the best for you.
2. Attend Credit Counseling
Before you file for bankruptcy, you are required to attend a credit counseling class that is approved by the US Trustee. These take about 60 to 90 minutes and cost around $50, though you can request a fee waiver if you are indigent. It is possible to take this class online or even by phone in some cases. Once the class is completed, you will receive a certificate of completion for you to file with your bankruptcy petition.
3. Enjoy the Automatic Stay
Once you file, an automatic stay of all civil proceedings goes into immediate effect. No creditor can contact you once notice of your filing and of the stay is received. Also, any collection activity including wage garnishment or bank levies must cease. In some instances, the amounts garnished or levied upon may have to be repaid. Foreclosure proceedings must also stop, although in Chapter 7 filings this is temporary.
The biggest benefit of the automatic stay is that you no longer have to endure nagging or even harassing phone calls from creditors.
4. Prepare the Challenges by Creditors
Creditors can challenge your petition if their property is classified as exempt or unsecured. They can also claim that you defrauded them by taking out a loan, cash advances or by using a credit card with no intention of repaying them. In other cases, a creditor may claim an unlawful transfer of certain property if done to defraud creditors or to prevent the court from seizing it. If this is a possibility, you should discuss this with a bankruptcy attorney before you file. In some cases, you may be able remedy this situation.
5. Start Rebuilding Credit
Once you file for bankruptcy, you can begin the process of repairing your credit. You can contact certain creditors before you file to explain the circumstances of your seeking bankruptcy relief such as loss of employment or overwhelming medical expenses from a catastrophic accident or illness.
Start rebuilding credit by obtaining prepaid credit cards in which the card company will report your payments to the credit agencies. Many auto dealers offer special deals for those who have filed for bankruptcy so that you demonstrate that you are credit worthy, so long as you make your payments on time.
You can also check your credit history by ordering a free credit report from each of the three major credit reporting agencies and seeing if there are errors that you can correct.