If your debts are higher than your income and your creditors have started becoming aggressive in their collection efforts, bankruptcy might be your next step. Instead of trying to make payments every month and struggling to stay afloat, you might just want to get a clean slate and get rid of those bad debts that hold you back.
Provided that you qualify for it, Chapter 7 bankruptcy can help you get rid of your unsecured debt and regain control over your monthly expenses. What does the process of filing for Chapter 7 bankruptcy involve?
Step 1: Determine if you qualify
Not everyone can file for Chapter 7 bankruptcy. Only those whose income is at or below the state median income level for their household size have the option of filing Chapter 7. Those with higher levels of income will need to look into other forms of bankruptcy. People also need to consider how much property they have, like equity in their homes, and whether they will have to liquidate those assets.
Step 2: Complete pre-filing credit counseling
Part of the bankruptcy process involves credit education. You will need to complete a course on the use of credit before you can file for bankruptcy. Your certificate of completion will be part of the package of information that you provide to the courts when you actually file.
Step 3: File your paperwork, and assert your automatic stay
Once you file your petition for bankruptcy with the courts, you have an automatic stay until the courts grant your discharge or reject your filing. The automatic stay protects you from collection activity. Most creditors will receive automatic updates about your filing status, but you may need to respond to some collection companies and creditors on the phone or in writing to advise them of your bankruptcy filing.
Step 4: The creditor meeting
Also called a 341 meeting, this is a courthouse meeting a filer must attend. The bankruptcy trustee will confirm your identity and review your paperwork. Creditors have the right to send a representative and discuss their rights
Step 5: Debtor education
You will also need to complete a second credit counseling course before your discharge. This course is a debtor education course, and you will require proof that you completed it to secure your discharge.
Step 6: Discharge
Once you have completed all the necessary steps, the courts will grant your discharge. You no longer have an obligation to repay the balance of accounts included in the discharge, and the protection of your automatic stay ends.
Each of these steps is a chance to make a mistake or miss a deadline, which means that you will likely need more information and support to handle this complex legal process.