Bankruptcy can be a heart-wrenching decision to take; especially if you are aware of its vice consequences. However, at the same time you need to know that this law has been put in place just to protect you from the clutches of the unsavory debts. If you find it almost impossible to manage your delinquent accounts and your creditors are few steps away to pounce on you with seize orders, you should immediately file bankruptcy for protection so as to get an automatic stay order to keep your creditors at bay.
First, make sure you have no other alternatives rather than filing for bankruptcy as it will have a negative impact on your credit score and stay in your credit report for up to 10 years. But if you are considering bankruptcy, it’s obvious that your credit score is already in bad shape. However, after the amendment of the U.S. Bankruptcy Code by the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), which became effective on October 17, 2005, prior to filing a bankruptcy case, a petitioner is required to get some credit counseling from a credit counselor certified by the U.S. Trustee and obtain a certification. This certificate must be received within 180 days of the date of the filing of the case.
There are two most common types of personal bankruptcy. Chapter 7, which is the most popular, is straight or liquidation bankruptcy. While, Chapter 13 bankruptcy is a court approved repayment plan. However, after the enactment of the BAPCPA, now it has become much more difficult to file for Chapter 7 because of the Means Test. That’s why nowadays many debtors are forced to file for Chapter 13.
Try to get the services of a bankruptcy attorney. Often people try to file themselves without consulting an attorney. This may not be a wise idea. Though hiring a bankruptcy attorney may cost you few bucks, an experienced bankruptcy attorney can make sure your best is taken care of. An attorney, who is well acquainted with the previous and current bankruptcy trends and practices, can help you to keep the maximum portion of your asset in the process.
Check out how much will it cost. While some attorneys charge a flat fee, some charge a fee based on the debt amount you have. However, some attorney might ask you for an upfront fee. The average fee is $1,700, but this significantly varies on where you stay. Again, you also need to bear court filing fees, unless you apply for fee waiver.
Once your lawyer files your bankruptcy petition, the “Automatic Stay” goes into effect. This automatic stay prohibits any collection attempt on the creditor or collection agency’s part. If any lender or collection agency willfully violates this, he/she may become subject to penalty like complete attorney fees and other damages.
Once your bankruptcy petition has been filed, you’ll be required to attend a creditors’ meeting (a ‘341 meeting’ named after the section of the bankruptcy code). Through conducting such a meeting, the bankruptcy trustee ensures that a debtor has given meaningful answers to all the questions based on the bankruptcy petition. Prior to the meeting, you should have met with your lawyer to ensure that all your debt and asset is listed and moreover, to discuss over the sample questions that are likely to be asked in the meeting. The answers that you’ll be giving against the bankruptcy trustee’s questions will be recorded in the meeting, which will last for 10 minutes.
If you have filed for Chapter 7, the bankruptcy trustee is responsible to determine whether or not your assets can be liquidated and used to repay your creditors. However, if the trustee concludes that all your assets are exempt, he/she will file a no-distribution report with the bankruptcy court. If the trustee determines that some of the assets are non-exempt, they will be sold to pay your creditors. However, you are required to enter into a 3-5 years repayment plan if you file for Chapter 13.