Bankruptcy Law & Filing Steps

Know the law in your state and the steps you need to take to file.

You (and your attorney if you hire one) need to decide whether a Chapter 7 Bankruptcy (liquidation) or a Chapter 13 Bankruptcy (reorganizing and paying portions of your debt) would be the best for your situation.

You also may not have a choice on which type as you have to pass the Means Test in order to file Chapter 7 (under the new bankruptcy laws). The action you would undergo for a bankruptcy filing are similar in both.

The initial action would involve a conference with an attorney regarding rights, and procedures (although this wouldn't occur if you file bankruptcy without an attorney).

Next is document preparation. The Petition in Bankruptcy is quite comprehensive and is the primary document for the bankruptcy filing. The documents can easily involve hundreds of pages.

Once the documents are complete, then they must be filed with the Bankruptcy Division of the U. S. District Court. At this time, you (or your attorney on your behalf) would pay the required filing fee, usually just under $300 if you didn't get a waiver of the filing fee.

Once you file the documents, and the Court approves them, your creditors are then put on notice by the Court advising of your filing, and when your first appearance will be held.

This is called a "Meeting of Creditors." Any of your creditors, who wish to question you about your debt, assets, etc., can appear at this meeting. If they wish to object to your bankruptcy filing, they may do it then, as well. In most instances, this is the only meeting that will occur for the majority of debtors.

We recommend you find a reputable attorney in your area, to file bankruptcy because the Court is very strict, and an error with the forms could cause them to be returned to be fixed or redone. You would then have to revise the documents, and resubmit, hoping they would be accepted.

Hiring a bankruptcy attorney gives you representation during the actual court proceedings, and they will work in your best interests and help protect your assets.

Bankruptcy Law Liquidation Exemptions

U. S. Bankruptcy Law allows for some generous exemptions for liquidation of property including the ability to keep your house, some clothing, personal clothing, household furniture, a vehicle, etc.

There are specific documents called "Schedules" in the Bankruptcy Petition. List the items you want to exempt from the bankruptcy there along with their estimated value.

One of the options you have, as a debtor, is to confirm a debt you filed on and basically keep the debt. This means that you sign a legal document agreeing to continue payments on the debt once the bankruptcy is closed.

Some instances where you may want to reaffirm a debt include an outstanding mortgage if you claimed exemption on your home.

Keep in mind, you will need to reaffirm a debt (in most cases) if you claimed exemption on property that has a security interest reserved (such as mortgage on your house, loan payments on your car, etc.) in order for the exemption to be approved by the Court.

State Amendments To Bankruptcy Law

Many individual states have included amendments to the Federal Bankruptcy Law which change the way a bankruptcy would work in that state. It is extremely important that you check with your state as to what amendments are in effect prior to filing bankruptcy.

It's so important to understand the laws relating to your state before you decide to file bankruptcy. A qualified bankruptcy attorney can easily tell you which exemptions apply in your state, or you can wade through the exemptions, in legaleze, via the Bankruptcy Districts Map that offers access to State Revisions to Bankruptcy Laws for the United States District Court.

What you need to know about declaring personal bankruptcy.

What happens to your credit score after bankruptcy?

Go to the Bankruptcy Facts article list.

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