If you know how to claim bankruptcy, you may be relieved from your unsecured debts, so you can eventually start all over again. Before you can proceed, ascertain first if bankruptcy is your last option, since it can have adverse effects on your credit record. When you file for bankruptcy, it is presumed that you have exhausted all other legal alternatives to cover your debts, but to no avail.
You should also consider whether you will engage the services of a bankruptcy lawyer. Many people prefer to employ an attorney due to the complexity of bankruptcy laws. Find a lawyer who can provide a free evaluation of your case, and who is more than willing to help you throughout the proceeding in case you decide to file for bankruptcy. At any rate, it is entirely legal and allowable to do the filing yourself. Either way, here’s how to claim for bankruptcy.
Determine which bankruptcy chapter to file for. Chapter 7 and Chapter 13 are the most common types of bankruptcy chapters based on the Bankruptcy Code. On one hand, Chapter 7 bankruptcy allows individual debtors to have a fresh start after all debts are discharged. This chapter is often preferred because the debtors can enjoy a clean financial slate in the end. However, to qualify for this chapter, debtors are required to pass the so-called Means Test, which makes it harder to file for Chapter 7.
On the other hand, Chapter 13 bankruptcy allows individual debtors to pay for their debts, usually over 3 to 5 years, in accordance with a repayment plan approved by the creditors.
Engage the services of a lawyer. To ensure success, a bankruptcy lawyer is needed. Your lawyer can help you comply with the Means Test requirement, and identify thereafter which bankruptcy chapter is appropriate for you based on the result of the test. It is true that going through a bankruptcy case is tough; therefore, you need the expertise of a bankruptcy attorney. To maximize your savings on the attorney’s fee, find a lawyer who charges a flat rate.
Prepare the necessary documents. Your lawyer will tell you which papers need to be prepared. These are your proof of income for the past 6 to 12 months, the amount of money you owe to your creditors, and the name and addresses of your creditors. For your income, pay stubs are not the only required documents, but you have to submit other contract jobs or any source of income for that matter. Never attempt to hide any of your income, or else you will be charged for perjury.
Undertake consumer credit counseling. Based on the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, an individual debtor is required to undertake a consumer credit counseling within 180 days from the day of filing a petition for bankruptcy. The purpose of counseling is to educate the debtor of some other alternatives available other than bankruptcy. Essentially, the debtor’s financial situation will be assessed, including car loans and credit card debts.
Attend the 341 Meeting. This is often referred to as the meeting of the creditors. After you have filed your petition, you are directly protected by the so-called “Automatic Stay,” which means your creditors cannot enforce any legal action to collect from you. Thereafter, you will be sworn under oath to confirm the truthfulness of your current financial situation. The court will then study the merits of your petition. Wait until the order of discharge is delivered to you.
Now that you are aware of the steps on how to claim bankruptcy, you should take time to compare bankruptcy to other alternative remedies. In that way, you will be able to determine if bankruptcy is the only remedy left for you. Remember, the fact that you filed for bankruptcy will stay on your credit record for the next couple of years. This simply means that you can hardly get a loan in the days to come, unless you are able to significantly improve your credit rating.