- Can I file bankruptcy? Before asking can I file bankruptcy, or how to file bankruptcy, make sure that there are no other alternatives that might work equally well, a lawyer can advise you on this. A bankruptcy can remain in your credit file for up to seven to ten years. However, if you are asking how to file bankruptcy or what is bankruptcy, your credit is probably already in damaged. Bankruptcy allows for a fresh start. Under the Bankruptcy Abuse Prevention and Consumer Protection Act ("BAPCPA"), which substantially amended the U.S. Bankruptcy Code effective October 17, 2005, prior to filing a bankruptcy case, an individual must obtain consumer credit counseling (which is a sham by the way) from an entity approved by the U.S. Trustee within 180 days of the date of the filing of a bankruptcy case. This counseling requirement is nothing more than a deterrent for consumers filing bankruptcy and runs up the cost and complexity for consumers asking how to file bankruptcy.
- What is bankruptcy? There are two common types of consumer bankruptcy. The most popular is the chapter 7 (a straight or liquidation bankruptcy), and there is also the chapter 13 (a repayment plan for individuals). BAPCPA has made it more expensive to file a chapter 7 bankruptcy case because of the means test, credit counseling requirement, and debtor education requirement. Many individuals will be forced into a do-it-yourself bankruptcy because of the new costs imposed by the powerful creditor lobby in Congress. Instead of asking "can I file bankruptcy" many consumers are being forced to ask "can I afford to file bankruptcy". This scenario is exactly what the creditor lobby intended when it pushed BAPCPA through Congress in 2005.
- Bankruptcy Procedure. A consumer should research their options as it relates to how to file bankruptcy. Some people choose to file without the aid of a lawyer, this is dangerous as creditors often seek to take advantage of unrepresented consumers. It is highly recommended to hire a lawyer by nearly all consumer rights groups, if you can't afford a lawyer right now, save and wait until you can, it will be well worth it. Bankruptcy Procedure is complex and often counter-intuitive. Lawyers spend years in school and then years practicing before fully understanding bankruptcy procedure and how to file bankruptcy. A non-lawyer is not going to be able to understand, even at a basic level, bankruptcy procedure without making a massive time commitment to learning what is bankruptcy.
- Bankruptcy Procedure. The first step is to consult with the lawyer you've selected, or their staff, and go over your "case". A series of simple questions will determine "can I file bankruptcy" and under which chapter. Generally, these questions relate to assets, liabilities, income and expenses. Recent transfer of property and other financial qualifications also affect what chapter of bankruptcy to file and the bankruptcy procedure.
- Can I file bankruptcy often comes down to cost as most consumers will qualify one way or another. The fees for filing are varied. Some lawyers charge a flat fee, determined by the complexity of the case and the amount of debt you have. Other lawyers charge a retainer plus hourly fees. The former is always the best route to go as it provides some certainty as to how much the case will cost. With hourly billing, the attorney's fees can get out of control. In chapter 7 bankruptcy cases, the fee must be paid before the case can be filed in court, otherwise, your attorney becomes a creditor of yours, which obviously creates a tremendous conflict of interest. The average fee is about $2,500 but this may vary significantly depending on where you live (e.g., a large city).
- Can I file bankruptcy for free? There are some places that will file for free if you do not have the financial means to do so. These groups are few and far between, often called "legal aid". If you are fortunate enough to get a positive response to "can I file bankruptcy for free" the waiting period if often months, if not years, as everyone would like this free service. Even if you do find a "free bankruptcy" (and keep in mind you get what you pay for), you'll still need to pay the court filing fee of $299 for chapter 7 and $274 for chapter 13. These fees go directly to the bankruptcy court. In some areas, there is a bankruptcy procedure which may enable a debtor to get the filing fee waived, but it is difficult and requires a bankruptcy judge's approval.
- What is bankruptcy? Once the bankruptcy case is filed, you should refer all creditors to your bankruptcy lawyer's office, once he or she has been retained. Your lawyer's office will then be able to speak on your behalf (which means no more annoying calls). Once your bankruptcy lawyer has filed your case, the "automatic stay" goes into effect. This means that NO creditor can legally contact you about your debt. The bankruptcy stay is vigorously enforced by most bankruptcy attorneys. A willful violation of the automatic stay can result in damages being levied against a creditor, including an attorney's fee, and in appropriate cases, punitive damages. What is bankruptcy? It's a powerful Federal Law in place to protect consumers, but you need to be working with a qualified bankruptcy lawyer to enforce the rules and get the full protection you are entitled to.
- Bankruptcy Procedure. Once your attorney has submitted your bankruptcy petition, you will be notified by mail (most often) of the date for your meeting of creditors (or a "341 meeting", named after the section of the Bankruptcy Code requiring it). This meeting allows the trustee to ensure that you have given truthful answers on your bankruptcy petition, and that you understand and agree to filing for bankruptcy. Your creditors may also ask questions of you at this meeting, but it is rare that creditors actually show up. Your lawyer, or a representative from their office, should attend the meeting of creditors with you to ensure everything goes smoothly. Prior to the meeting, you should have reviewed your bankruptcy petition so that you are familiar with what's listed, and you understand the bankruptcy procedure. Once you are sworn in at the meeting, you will answer questions that are recorded. The meeting goes very quickly in most cases and can last under 1 minute.
- How to file bankruptcy. If you are thinking about filing a bankruptcy case, you must not use your credit cards within the months leading up to the filing of your case. If you do so with the intent to file bankruptcy (not having the intent to repay at the time you charged), a creditor can challenge the discharge of that debt or even your right to discharge any debt. If you obtained the debt knowing that you could not repay it, you may not be able to discharge that debt if the creditor challenges it through a lawsuit, or adversary proceeding, in your bankruptcy case. Only a bankruptcy lawyer can give you legal advice on such issues.
- How to file bankruptcy. In a chapter 7 case, the trustee will determine whether or not there are assets that can be liquidated and used to repay your creditors or if your is a "no-asset" case. If the trustee determines that all your assets are exempt, a report of no distribution will be issued and filed with the bankruptcy court. If the trustee determines that there are non-exempt assets, these assets will be sold and payments may be made to your creditors. In most chapter 7 cases, there is no repayment to creditors. In a chapter 13, you will be required to enter into a 3 to 5 year plan, in which you will pay creditors as much as you can over that time pursuant to bankruptcy procedure.
- When you ask can I file bankruptcy, what you really mean is can I get a discharge. The 60th day after the meeting of creditors is first set is the deadline for creditors to file lawsuits to challenge the dischargability of a particular debt or your entire discharge. If no such lawsuits are filed, shortly after that 60th day (longer in some places) you will receive notification of a discharge if you filed chapter 7 pursuant to standard bankruptcy procedure. A discharges means that you have no further obligation to repay the discharged debt, and that your creditors can never collect the debt from you. If you filed chapter 13 cases, you will receive the notice of discharge approximately 30 to 60 days after your final payment has been made on your chapter 13 plan, also pursuant to standard bankruptcy procedure, and the trustee ensures your payment plan has been followed and completed. Not all debts are discharged in a chapter 7 or even a chapter 13 case. Non-dischargeable debt can include student loans, certain taxes or government debt, and alimony and child support, among others. Whether or not a debt is discharged depends on certain Bankruptcy Code provisions and bankruptcy procedure.
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