How to File Bankruptcy

Confused about how to file bankruptcy? You are not alone. Chances are you have heard about the Bankruptcy Abuse Prevention and Consumer Protection Act enacted in 2005. BAPCPA implemented many restrictions and requirements; making it considerably more challenging to file.

Understanding the details of how to file bankruptcy generally requires the assistance of a bankruptcy attorney. Although hiring a lawyer to represent you in court is not required, few people possess the knowledge or skills to go it alone. The complexities of BAPCPA could place debtors who file without legal representation at risk for having their bankruptcy petition rejected or later dismissed.

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The first step of filing bankruptcy requires debtors to determine which chapter is best suited for them. There are six bankruptcy chapters including Chapter 7, 9, 11, 12, 13 and 15. Chapters 7 and 13 are reserved for individuals, while the remaining four chapters are reserved for businesses, partnerships, corporations or farmers.

Chapter 7 is oftentimes referred to as "liquidation" because debtors are required to liquidate their assets to repay creditors. Certain debts cannot be discharged under Chapter 7 including delinquent taxes, outstanding child support, pending lawsuits, and government funded or guaranteed student loans.

Chapter 13 bankruptcy is known as "reorganization" and requires repayment of debt. Debtors are allowed to retain their assets by developing a repayment plan. Most bankruptcy repayment plans are repaid over a period of three to five years.

BAPCPA requires debtors to undergo the 'means' test; a financial tool used to determine the debtors median income. The means test compares the debtor's income to their states' average income. This figure is then used to determine how much debt must be repaid.

A large percentage of the debtor's disposable income must be contributed to the repayment plan. During this time, debtors cannot take on any new debt unless approved the bankruptcy Trustee. Chapter 13 repayment plans can place a huge financial burden on the debtor and cause them to fail out of bankruptcy.

When debtors fail out of bankruptcy because they are unable to adhere to the repayment plan, creditors can petition the court and request the judge to dismiss the bankruptcy. When this occurs, the judge can elect to allow the debtor to file for Chapter 7 protection or dismiss the bankruptcy. If bankruptcy is dismissed, debtors lose protection from the court and creditors can move forward with collection action, including foreclosure.

Once bankruptcy forms are completed, a petition must be filed with the court. Generally, within a few weeks, a 321 Creditor Meeting is arranged. During this meeting, creditors are allowed to question the debtor about the circumstances which caused them to file bankruptcy, as well as how they plan to get back on track financially.

Creditors are not required to attend the 321 Creditor Meeting. However, if they want their claims to be included in the Chapter 13 repayment plan, they must submit their claim to the court within 30 days of the creditor meeting.

The last stage of the bankruptcy process requires making an appearance in front of a judge. The judge will review the petition to ensure all requirements have been met, including credit counseling. The judge will either discharge debts through Chapter 7; approve the Chapter 13 repayment plan; or dismiss the bankruptcy petition altogether.

The U.S. Department of Justice developed the U.S. Trustee Programto assist individuals in need of bankruptcy protection. The website offers an abundance of information, forms, resources, and approved credit counseling and debt education agencies.

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