Learn more. Feeling crushed by debt is one of the most stressful situations possible, but there are options. If you find yourself saddled with more debt than you can reasonably pay off in a timely manner, you can always file for bankruptcy.
But sometimes bankruptcy is the best way to get a new start so you can then stay on top of your finances, and with hard work, you can begin to turn your financial life around. To help you better understand how bankruptcy works, we reached out to financial lawyers who specialize in guiding their clients through the process.
If a person or a business can no longer meet their outstanding debts, they can begin the legal proceeding known as bankruptcy. When this happens, the debtor files a petition to a federal bankruptcy court in which their assets are measured and evaluated. From there, depending on what type of bankruptcy they file for, their assets may or may not be used to repay part of their debt. Filing for bankruptcy is a big step, but sometimes it is the right one.
Camron Hoorfar, J. However, you may have to surrender your assets like cash, property, etc. It stays on your credit reports for ten years. The first step to filing for bankruptcy is to find the right lawyer. While you can try to go through the process on your own, it would be a bit like representing yourself in court; i. According to Hoorfar, a lawyer can help you in the following ways. When looking for a lawyer, Wesley M. Do you feel welcomed and informed?
If not, trust your gut and interview other lawyers. This will be known as Schedule One, so make sure to include any liens against the property. The name of your bankruptcy trustee. At this point, your case has been filed! The automatic stay now protects you from all debt collectors. The Chapter 7 trustee is an official appointed by the court to oversee your case and liquidate, or sell, nonexempt property for the benefit of your creditors.
Not all types of bankruptcy require the involvement of a bankruptcy trustee, but both Chapter 7 and Chapter 13 cases have one. Pay attention to mail you receive from the trustee after filing your case. The trustee will send you a letter asking you to mail them certain financial documents, like tax returns, pay stubs, and bank statements. After filing your bankruptcy forms, you will need to complete a Debtor Education Course from an approved credit counseling agency. The purpose of the course is to educate you on making smart financial decisions going forward but does not provide legal advice about the bankruptcy process.
Your meeting, or meeting of creditors , will take place about a month after your bankruptcy case is filed. Due to the COVID pandemic, all meetings are held either by video conference or via telephone until at least October. The main purpose of the meeting is for the case trustee to verify your identity and ask you certain standard questions and most last only about 5 minutes. Your creditors are allowed to attend and ask you questions about your financial situation, but they almost never do.
You should also bring a copy of your bankruptcy forms to the meeting, along with your last 60 days of pay stubs, your recent bank statements, and any other documents that your trustee has asked for. The bank will either file request with the bankruptcy court to ask permission to retake the car, or wait until your discharge is granted before picking it up.
If you want to keep the car, you can either reaffirm the loan or redeem the car. You have to complete and sign the agreement and return it to the bank within 45 days from your meeting. The bank files the signed agreement with the court for approval. To redeem the vehicle you have to file a motion with the court and, once granted, buy the car from the bank for its current value.
This gets you out of having to pay the amount left on the loan, but payment has to be made in one lump sum. Upsolve Community Member How difficult is it to do my own chapter 7? Chapter 13 bankruptcy is another type of bankruptcy available to consumers.
The main difference to Chapter 7 is that you pay back some of your debts through the Chapter 13 trustee.
This is determined by the means test analysis, your actual income and expenses and the terms of your repayment plan. Since Chapter 13 payment plans can be pretty complicated, anyone considering a Chapter 13 filing should talk to a bankruptcy attorney first. Most American consumers get their fresh start by filing Chapter 7 and eliminating credit card debt, medical debts, and most other unsecured debt. Filing for bankruptcy takes some preparation.
Hiring a good bankruptcy attorney is one way to file. But if you can't afford the attorney fees to hire one and you need a fresh start, Upsolve may be able to help. If you're eligible , our free web app will walk you through the process and help you prepare your forms for filing with the court. Attorney Andrea Wimmer. Andrea practiced exclusively as a bankruptcy attorney in consumer Chapter 7 and Chapter 13 cases for more than 10 years before joining Upsolve, first as a contributing writer and editor and ultimately joining the team as Managing Editor.
While in private practice, Andrea handled Take our screener to see if Upsolve is right for you. Upsolve is a c 3 nonprofit that started in Our mission is to help low-income families who cannot afford lawyers file bankruptcy for free, using an online web app.
Spun out of Harvard Law School, our team includes lawyers, engineers, and judges. We have world-class funders that include the U. To learn more, read why we started Upsolve in , our reviews from past users, and our press coverage from places like the New York Times and Wall Street Journal.
For individuals, the most common type of bankruptcy is a Chapter Before you consider filing a Chapter 13 here are some things you should know:. Partnerships and corporations file bankruptcy under Chapter 7 or Chapter 11 of the bankruptcy code. Individuals may also file under Chapter 7 or Chapter Other types of bankruptcy include Chapters 9, 12 and Cases under these chapters of the bankruptcy code involve municipalities, family farmers and fisherman, and international cases. Bankruptcy Courts within a day or two of the petition date.
If you're not sure if we received notice, call the Centralized Insolvency Operation at and give them your bankruptcy case number. Call with your bankruptcy case number and ask to be referred to a bankruptcy specialist. Call — at the U. Bankruptcy Courts and follow the prompts. Dismissal: IRS may keep payments, and time in bankruptcy extends time to collect remaining tax liabilities. Discharge: Will eliminate discharge personal liability for tax debts older than three years unless returns filed late.
Businesses don't receive a discharge since they're liquidated.
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