How to claim bankruptcy

Are you struggling with debt that seems impossible to manage? Maybe you’re considering bankruptcy.

In general, the first step anyone facing debt should take is to contact a certified credit counselor. There may be another solution before you start asking about how to claim bankruptcy.

In addition, the Bankruptcy Reform Act of 2005 makes it a requirement for anyone seeking to claim bankruptcy to go through a pre-filing credit counseling session. If you attempt to file before going through the counseling session, your case will be dismissed. This is very important because if you file for bankruptcy — even if it doesn’t go through — the filing will still be on your credit report for 10 years.

You should also be aware that there are two types of bankruptcy for individuals filing, Chapter 7 and Chapter 13. Here’s what they mean:

Chapter 7 bankruptcy

This wipes out your debt, but only certain filers will qualify for this based on income, state laws, equity in your home and a number of other factors. Some debts will not be dismissed such as student loans or back taxes.

Chapter 13 bankruptcy

This is a structured repayment of your debts. The repayment usually happens in a three- to five-year period. Be aware that in some states your wages will automatically be garnished.

If you are going to file for bankruptcy, here are a few of the steps you will need to take:

• Find an attorney. Contact your local Bar Association for a recommendation. It is possible to file on your own, but it’s not recommended because bankruptcy is a very complicated process. Also, be aware that in addition to the cost of filing for bankruptcy there will also be attorney’s fees. Make sure you know all the fees in advance.
• Go through the required counseling session and obtain your certificate.
• Go to court. After filing, your creditors will look at your situation, process your paper work and have a meeting to determine how to handle your debts. You will have to go to court and testify.
• Take an education class. After your court appearance you have 45 days, as required by law, to complete an education class and get your certificate of completion to your attorney. Then your bankruptcy can be discharged.

There are additional parts of the bankruptcy process. For instance, you will have to sign what is called a “Reaffirmation Agreement” to maintain possession of things like your home or vehicles. This agreement says you will continue to make your payments. Filing also gives you an automatic stay on foreclosures, evictions, enforcement of alimony and some other legal actions.

A qualified attorney can explain the intricate details and guide you through the process.