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Filing Chapter 7 Bankruptcy--FAQ's

Updated on June 10, 2014

Budgeting Your Money Post-Bankruptcy

Filing bankruptcy is a scary process. If you are thinking of filing Chapter 7 bankruptcy, you probably have some questions on the process. This guide gives the answers to some of the common bankruptcy questions.

How Much Does It Cost To File Chapter 7 Bankruptcy?

The costs of filing bankruptcy will vary. Your attorney will have a preliminary meeting to go over your financials. At that time, he will give you an estimate of costs. Chapter 7 bankruptcy typically costs between $1100 and $1800.

What Are the Steps to File Bankruptcy?

1.Contact a lawyer. A good bankruptcy attorney will help you through this process.

2.Schedule your consultation appointment. You need to take all of your relevant financial records.

Be sure to bring:

· All banking statements for the previous 12 months

· Statements showing assets such as stocks, bonds, 401K, etc.

· Tax returns for the past 24 months

· Copies of bills for each of your debts

· Your ID

· Recent paystubs or, if self-employed, profit and loss sheets for previous months

3.Plan to spend at least an hour at your consultation. You will need to fill out paperwork regarding your current financial situation, your anticipated future financial situation, a list of all assets and liabilities, and a current record of income as well as monthly spending.

4.Your next step is to complete a credit counseling course. This can be done in person, via the phone, or even online. Online credit counseling courses are nice because you can go through them at your own pace. Once the course is complete, the online instructions will ask you to contact a representative via the phone number provided. The rep will verify your information, ask if you understood the course and ask if you have any questions. Then he will email the completion certificate to you and your attorney.

5.Assuming that your financial situation qualifies to file a Chapter 7, your attorney will then need you to sign the bankruptcy petition. Once this petition is filed and your debtor’s education course is complete, a meeting of the creditors is scheduled.

What is a Debtor’s Education Course?

The debtors education course is a mandatory course that you attend after filing bankruptcy. It will take more time than the credit counseling. Expect to dedicate about two hours to completing the course. This portion is available online as well. The information provided covers planning a budget, managing your finances, and rebuilding your credit post-bankruptcy.

What Is the Meeting of the Creditors?

The meeting of the creditors, or 341 hearing, takes place several weeks after the Chapter 7 bankruptcy petition is filed. This is the part where debtors often feel anxious. The meeting of the creditors will consist of you, your spouse (if applicable), your bankruptcy trustee and any creditors contesting the bankruptcy. As long as you have not fraudulently accumulated debt with no intention to repay, it is not likely that your creditors will show up for this meeting. You will present your ID to the trustee. He will review your file. He may ask questions pertaining to your debt such as why you took out a particular loan or what happened to cause the loss of income. He is merely making sure that you are filing the bankruptcy for legitimate reasons.

The trustee also wants you to know how filing bankruptcy will affect your credit in both the long and short-term. These meetings are quick and informal. The trustee will either excuse you or ask you to return at another time with complete financial information (if needed). After the meeting of the creditors, the trustee decides if the Chapter 7 bankruptcy petition meets the requirements of Federal law. If so, a discharge from bankruptcy is scheduled.

When is the Bankruptcy Discharged?

A bankruptcy is often discharged between 75 and 120 days after filing the petition. Once the discharge has been issued, you are relieved from the debt and can begin your fresh start.

Filing bankruptcy is not always the answer to financial problems. Your credit will significantly decline. This is a choice that must be made only after significant consideration to both the benefits and disadvantages. Filing Chapter 7 bankruptcy is a big decision, but it can also mean a huge weight off of your shoulders. If you have no means to repay your debts, and they have become out of control, it may be time to seek the advice of a bankruptcy attorney who can better guide you through this time.

Not Quite Ready to File? Let Dave Ramsey Help with a Total Money Makeover

Too Late to Makeover Your Money? Learn How to File for Chapter 7 from NOLO

Comments

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    • JanuaryFry profile imageAUTHOR

      JanuaryFry 

      7 years ago from Illinois

      It is a very hard decision to make. We filed. I was having panic attacks over our decreasing income, pending foreclosure, and stack of accumulating bills. My husband and I own a plastering company. Enough said in the state of our economy, right? 18 months with no work, a staggering local unemployment rate, and a savings account that was literally null leaves you with few options.

      We filed bankruptcy, lost the house, lost the car, and started over. I've been on my own since I was 15, so starting again after owning two homes and finally feeling "settled" was not easy. We are still picking up the pieces, but I'm so glad that we made the choices we did. Even with the bankruptcy, we managed to get behind on some bills after another setback, but it's all coming back together--slowly. LOL

      The piece of mind after filing was worth it. The anxiety and panic attacks slowed; that alone was enough to help me reorganize our situation and come up with a plan. I highly recommend that anyone thinking of filing speak with a knowledgeable and practiced attorney who can explain the differences in chapters, along with the pro's and con's of filing. An eager to file attorney is one to avoid. If anything, the attorney should seem eager to have you work out the issues using credit counseling before he even thinks about telling you that filing would be beneficial.

    • Sunnyglitter profile image

      Sunnyglitter 

      7 years ago from Cyberspace

      I hate to admit this, but I've been considering filing bankruptcy. I was sued earlier this year, but didn't show up because I was never formally served. They dropped the papers off at an old address - from 10 years ago. LOL

      I'm the sole breadwinner at my house, and there's no way I can come up with the amount of money I was sued for. I was dumb enough to make a verbal agreement with a former landlord, and it came back to haunt me. Maybe I'll write a hub on the importance of getting things in writing later.

      Oh, and I also voluntarily gave my car back to the dealer after my boyfriend decided to stop paying his share of the rent and utilities. I'm sure that's not doing my credit score any favors, either. Sigh.

      Anyway, I'm really glad you wrote this. Bankruptcy is really confusing, and I have no idea whether it is even something I want to do. I need to get all the facts before I make a decision that will affect my FICO score for years.

    • JanuaryFry profile imageAUTHOR

      JanuaryFry 

      7 years ago from Illinois

      Bankruptcy is never the end. It can provide a new beginning to those struggling in today's economic situation. Good luck to all!

    • livewithrichard profile image

      Richard Bivins 

      7 years ago from Charleston, SC

      Excellent information and well presented. I like that you added "fresh start" since many think that bankruptcy is the end all.

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