Filing for Bankruptcy

There are about six steps you must follow in order to legally file for bankruptcy. The process, beginning from the day you file and ending the day a court order is signed by a judge discharging your debts, takes nine-twelve months. At the end of the process, your debts (as outlined in official bankruptcy documents) are cleared and you will no longer be held liable for repaying those debts. The following outline provides you with general information about how to file for bankruptcy. Be sure to follow your attorney’s instructions.

Find a bankruptcy attorney

First, find a licensed bankruptcy attorney (an attorney who may also be a licensed accountant); this is a person licensed by the government to perform bankruptcy procedures. There are several resources for locating a reputable attorney. Use your local telephone directory, legal aid office, or search online. Your attorney will oversee the sale of your assets and the distribution of any proceeds to your creditors. Your attorney will also handle all phone calls and inquiries from your creditors.

Meet with attorney

Once you’ve chosen an attorney, you need to schedule an appointment with him or her. You will need to complete some preparations to get ready for the meeting. Gather together as much of your financial information as possible – documents such as your most recent credit card statements and loan documents. Your attorney can tell you exactly what you will need to bring. During your first appointment, your attorney will explain the bankruptcy procedure, consider your financial position, and advise you whether bankruptcy is the best option. You will probably also discuss the attorney's fee for handling your bankruptcy. Each attorney sets the fees that he or she charges, so your fee will vary depending on whom you choose for representation. This fee must be paid by the person filing for bankruptcy. If you can not pay the full fee at once, you and your attorney may work out other arrangements. Some attorneys will ask for a down payment followed by monthly payments. Others may agree to payment after you have received your annual income tax refund. If your income after expenses exceeds certain levels, you will be required to pay a portion of the excess to the attorney while you are in bankruptcy.

Filing paperwork

After you and your attorney have discussed options available to you, if you decide to pursue bankruptcy, the attorney will complete the necessary paperwork to officially file for bankruptcy. Additionally, the attorney will notify your creditors about the bankruptcy proceedings, so phone calls to you and other collection attempts should stop. When the appropriate forms and documents have been completed, your attorney files them with the federal government's Office of the Official Receiver. Once your documents have been filed, and before the court has made a decision regarding your case, you are considered to be an "undischarged bankrupt" and you are officially "in bankruptcy". All legal creditors’ claims against you then stop, and all calls and questions regarding your debts are handled by your attorney.

Attend creditors' meeting

Within 3 to 4 weeks after you have officially filed for bankruptcy, you may be required to attend a meeting with your creditors. This meeting will only be scheduled if more than one-fourth of your creditors request it. At such a meeting, your creditors are informed of your financial situation. If you have not previously declared bankruptcy, and most of your creditors are large companies such as VISA and MasterCard, this kind of meeting probably will not be required.

Financial counseling seminars with attorney

You will be required to attend two mandatory financial counseling sessions with your attorney. The first of these two counseling sessions usually takes place within the first month of filing for bankruptcy. You and your attorney or one of the attorney’s staff members will go over possible reasons for your financial difficulties, your financial management skills, and how you plan to budget in the future. Your second counseling session will generally take place about four months after you file. In this session, you and the attorney will discuss financial planning strategies and effective budgeting techniques.

Final discharge

The closing step in a bankruptcy procedure is your final discharge. When the court has declared that your debts are discharged, it means that your debts are officially cleared. If it is your first time filing for bankruptcy, you will probably receive an automatic discharge about nine-twelve months after you initially filed.

If you have previously filed for bankruptcy, or if one of your creditors objects, it may be more complicated to have your debts discharged. Your attorney will request a discharge from the court, and you may have to attend a hearing in which a judge will hear your case. If you recklessly accumulated debts, or did not follow procedures as required (such as not attending financial counseling sessions,) the judge may decline your discharge request or order that as a condition of discharge, you must make certain monthly payments for a specified period of time.

When a court has officially discharged your debts, your bankruptcy procedure is formally over. However, your bankruptcy remains on your credit record for at least seven years from the date of your discharge. This will probably negatively influence your ability to get loans and other kinds of credit in the future. Ask your attorney about additional effects of bankruptcy.