Filing for bankruptcy has always transported a certain stigma with it. Today, it still carries an air of negative view around it. Filing for bankruptcy could be complicated if the debtor files without the aid of an attorney. Filing without an attorney is strongly discouraged because bankruptcy has long-term financial and legal consequences, which must be taken into account when drawing up the paperwork. The bankruptcy procedure is the same whether under chapter 7 or chapter 13, but the results are not the same. This article will guide debtors through the procedure of filing for bankruptcy.
Chapter 7
In terms of documentation, there is no difference between chapter 13 and chapter 7 requirements. In either case, the debtor must file a petition stating their inability to repay their lenders. The bankruptcy court will also require the debtor to file schedules of possessions and liabilities, salary and expenses, any open contracts or leases and a statement of economic affairs. Since the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 needs all debtors filing for chapter 7 to attend credit counseling at least 180 days before filing, the debtor should also present a certificate of credit counseling to the court when filing. If the debtor has mostly consumer debt such as credit card debt, they should also file documents stating any salary received from employers in the last 60 days, any interest the debtor has in qualified state or federal tuition accounts, a statement of monthly internet income and any expected increases in income or expenses post-filing, and a copy of any debt repayment plan that was developed during credit counseling. If the debtor is married, their spouse must also provide the documentation even if only one of them is filing. Twenty to forty days after filing, the meeting of lenders will take place. The bankruptcy trustee will place the debtor under oath and both the trustee and the creditors will ask the debtor inquiries to verify their financial status. After this meeting, if none of the lenders object, the bankruptcy court will issue a discharge relieving the debtor of the liability to repay their debts.
Chapter 13
If the debtor has the ability to repay their lenders and they're faced with foreclosure of their home, they should file for chapter 13 instead of chapter 7 because this chapter allows them to save their home and even completely repay their delinquent mortgage over time. Chapter 13 allows the debtor to set up a repayment plan that the lenders are obliged to agree to by court order. The debtor should present the plan to the bankruptcy court in question and make it succeed once it's confirmed. It's on the debtor's shoulders to follow their repayment plan. Depending on the severity of their debts, this repayment plan may lengthen for up to five years. Even after the repayment plan is finished, the bankruptcy stays on their credit record for up to 7 years.
Conclusion
Filing for bankruptcy is simple and painless if finished correctly and with the appropriate direction.
