How Do I File for Chapter 7 Bankruptcy?

How do you file for Chapter 7 bankruptcy? The process is relatively quick, especially because it is the most common type of bankruptcy filed by consumers each year. The process can, however, take longer than necessary if you do not follow the filing deadlines or complete the steps required by the court.

Luckily, because it is a commonly filed bankruptcy type, the steps for completing it are straightforward. And when you work alongside a local bankruptcy attorney, you can finalize the process and get a fresh start on your finances.

The Common Steps to Filing for Chapter 7 Bankruptcy

Some of these steps you can take before your initial consultation with an attorney, while others you should wait until you have met with an attorney and made sure you qualify for Chapter 7 – then follow the right steps in order.

Step 1: Analyzing Your Existing Debts

You should gather all documentation regarding your existing debts, including any that you want to discharge in bankruptcy and any that you cannot discharge in bankruptcy.

Certain debts are not dischargeable, including child support, student loans, and taxes (both federal and state).

While you gather your information about any outstanding debts, you will also want to work on gathering information about your income and assets, including any savings accounts, assets that you may need to sell, and assets that were used as collateral to secure a debt.

Step 2: Assess any Applicable Property Exemptions

Next, you need to know what property is exempt from liquidation and what property you will need to sell before you can complete the bankruptcy process. All states have their laws regarding exemptions, and in most cases, you can keep your family home as long as the value is up to specific amount. Luxury items and second properties, however, are not protected and the courts may require that you sell them and use their proceeds to pay down existing debts before the remaining balances discharge.

Step 3: Determine Eligibility

Now is the time to contact an attorney. During your initial consultation, your attorney will go over the debts you have, your income, and determine if you qualify for Chapter 7. Chapter 7 has strict income requirements based on the number of family members you support and your total debt. If you do not qualify for Chapter 7, you are not out of options. Instead, your attorney will work on a Chapter 11 plan with you so that you can pay off your debts through a court repayment plan.

The eligibility varies by state, but to qualify for Chapter 7, your median income over the past six months will determine whether you can file for Chapter 7 or not.

Step 4: Reaffirm or Redeem Your Secured Debts

Another step your attorney will take is paying the creditor for any property that you want to keep as well as the property you may have used as collateral for a loan.

You have the option to redeem, which means that you pay the creditor to replace the value of the property used as collateral. Likewise, you can choose which debts you want to reaffirm, which means you agree that you will continue to pay under the same terms while filing for bankruptcy, and that the debt is not part of your Chapter 7 dissolution request. In most cases, individuals will reaffirm car loans or mortgages so that they can keep these items while going through Chapter 7.

If you cannot pay, then you will need to surrender, which means the creditor can take the property back.

Step 5: Filing the Necessary Forms

Your attorney will complete the multiple forms you need, which basically tell the court why you qualify for Chapter 7 bankruptcy. You include information about your property, assets, debts, income, expenses, and transactions you wish to discharge in Chapter 7.

You also must provide the court with a list of creditors so that creditors are notified about your pending Chapter 7 and have a chance to petition the court.

Lastly, in your paperwork, you must also include any property transactions that have occurred over the past decade, including purchasing, selling, acquiring, inheriting, etc.

Step 6: Go through Counseling

Before you can finalize your Chapter 7 case, you are required to take a credit counseling course. You must take this course through a court-approved service, which your attorney can help you find.

Once you complete your credit counseling, you can officially file your petition for bankruptcy, including all schedules, forms, and creditor information. Now, you have officially started your case, but you are not done. Once you file, you must pay the filing fee, or you can request a waiver if your financial situation is dire enough.

Step 7: Attend Meeting of Creditors

You provide the court with a list of creditors, and the creditors have the opportunity to attend what is known as the meeting of creditors. Here, they can dispute your bankruptcy request and ask the bankruptcy trustee to verify your income and debts, etc. In most cases, creditors will not appear to the meeting. However, do not assume that a creditor will not show to dispute a debt. Your attorney will be there at the meeting to advise you as to how to answer questions, but the process is often quick and uncomplicated.

Step 8: Complete Your Education Course

You took credit counseling, but you also must take a debtor education course, which you do after your paperwork is completed. You cannot receive a discharge until you complete the course. Therefore, make sure you schedule your time for the class early, and submit the certification of completion as quickly as possible.

Work with a Local Bankruptcy Attorney Today

If you need to file for bankruptcy, do not try to do it alone. Instead, consult with a Chapter 7 bankruptcy attorney. Explore your options, make sure you file the right paperwork, and complete all of the necessary steps so that you can discharge your debts without unnecessary delays.