What Goes Into Filing for Chapter 7 Bankruptcy?

If you’re trapped under a mountain of debt and see no clear way out of it, a Chapter 7 bankruptcy could wipe out that debt and give you a fresh start with your finances.

Filing for Chapter 7 bankruptcy, however, can be  complicated if you’re attempting to handle it on your own. That’s why it’s well worth enlisting the services of qualified bankruptcy lawyers.

A qualified bankruptcy attorney can guide you through the Chapter 7 bankruptcy process and ensure every eligible debt is discharged. The small fee you’ll pay for this service could end up saving you a lot of money in the long run. Most lawyers offer a free initial consultation.

Steps for Filing for Chapter 7 Bankruptcy

Although you, as the debtor, may not have to make more than one trip to the courthouse, the actual Chapter 7 bankruptcy process takes four to six months.

Generally speaking, if you want to file for Chapter 7 bankruptcy, you can expect the following process:

1. Complete Credit Counseling for Chapter 7 Bankruptcy

Filing for Chapter 7 bankruptcy is a last resort. This is why you’re required to complete a credit-counseling course that’s been approved by the U.S. Department of Justice before you can file. You can take the course in person, online, or by phone. In taking this course, you may discover you have other options beyond filing for bankruptcy.

2. Gather All Your Financial Documents

Once you’ve determined that Chapter 7 is your best option out of debt, you must pass a means test. This test compares your income to the median income for households of your size in your state of residence to determine whether you’re able to cover a portion of your debt.

You’ll also be required to file a petition. The means test and petition are just two of the many documents you’ll need to prepare before filing. In addition to these, you’ll be required to present financial documents which report the following:

• Current income
• Property owned in the last two years
• Exempt property (see below)
• Debt and creditors
• Living expenses
• Financial transactions within the last two years

You can find most of these forms online and consult with your bankruptcy attorney for those you can’t.

It’s important to understand that once your bankruptcy petition is filed, an automatic stay goes into effect. This means that your creditors can’t legally collect the debt you owe them during this time as your assets and property will be protected by the court.

3. Get Appointed a Bankruptcy Trustee

With all of your financial documents in order, you’ll be appointed a court-approved trustee. He or she will examine all your debt, assets, and property. The court will also send a notice to each of your creditors and set a meeting with your trustee. This part of the process typically takes about a month after you file.

Be aware that during this part of the proceedings, the trustee may ask you questions about your debts and paperwork, and you must answer truthfully because you’ll be under oath. You also can’t sell or donate the property you listed in the filing documents or pay off pre-filing debt during this time without approval from the court.

The trustee will then arrange to pay back your creditors by liquidating or selling your non-exempt property, but your exempt property is safe. Exempt property is property you get to keep. In most states, exempt property law protects the following:

• Your vehicle
• Some equity in your home
• Clothing and furniture
• Anything required to perform your trade or work
• Retirement plan assets including 401(k) plans and individual retirement accounts (IRAs)
• Social Security payments you’ve yet to spend

You can consult with an experienced bankruptcy attorney to learn which of your assets are exempt from creditors.

4. Understand Which Debts Will Not Be Forgiven

While bankruptcy  will discharge most of your debt at the end of a Chapter 7 bankruptcy proceeding, there are some payments the court will not discharge. Some examples are as follows:

• Child support
• Alimony
• Student loan debt
• Most back taxes
• Debt you’ve incurred via illegal means

Debts falling into these categories stick with you despite bankruptcy. This is another reason to consider working with a bankruptcy lawyer.

You Don’t Have to File for Chapter 7 Bankruptcy Alone

No matter how insurmountable your debt may seem, filing for Chapter 7 bankruptcy with an experienced and seasoned attorney is going to give you the best chance to get back on your feet in less time.

So, if you’re considering starting the filing process, we strongly encourage you to contact us. We’re not bargain basement attorneys looking to make a quick buck. Our goal is to help you get the fresh start you deserve!

During your free initial consultation, we’ll discuss your individual situation and guide you on the inside track to success in filing for Chapter 7 bankruptcy. You’ve got nothing to lose.