Filing for bankruptcy is no small task. In fact, many people find filing overwhelming because they know very little about the ins and outs of the process. Bankruptcy is meant to be a tool of valuable help and relief, not difficult or intimidating. Knowing what to expect and how to go about the process can be a great way to get started and save a lot of headaches in the end.
Preparation and Qualification
One of the best places to start learning about the bankruptcy process is qualification. Not everyone will qualify for bankruptcy. In fact, there are specific rules about qualifying for bankruptcy that are meant to keep the system honest and beneficial for those who truly need it. For example, qualifying for Chapter 7 is not as easy as it once was.
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Since changes were made to the bankruptcy code in 2005, a debtor must (a) earn an income less than the median income level of their state or (b) lack sufficient disposable income to repay debts; in order to qualify for Chapter 7. While qualifying for Chapter 13 is less difficult and generally open to most, there are rules as to the specifics of a debtor's case. It is important to have an idea of qualification before filing the paperwork.
Debts And Assets
As the two most important pieces of financial information in a bankruptcy case, there is much to say about one's debts and assets. In general, a debtor will be required to list all creditors and debt accounts on the bankruptcy petition. This information is used to determine one's overall debt burden and evaluate creditor priority in terms of the potential for repayment. It is important that a debtor does not attempt to accumulate more debt or pay off any debts prior to filing.
Assets are also very important to the case in that the court uses a list of assets to determine the potential for debt repayment or evaluate the overall financial position of the debtor. Assets cannot be guaranteed to be protected from creditors and liquidation in a Chapter 7 case, but there are certain bankruptcy exemption laws that protect some of a debtors assets. Assets are also better protected in a Chapter 13 case, as the debts are being repaid through a payment plan. Secured debt assets, such as a mortgage or car loan, are generally better managed through a Chapter 13 case over a Chapter 7 case.
Hiring Representation
Most people assume hiring a bankruptcy attorney is just an added expense with little benefit. The truth is having adequate representation can maximize the chances at successfully obtaining a debt discharge. Bankruptcy attorneys know the system well and can prescreen debtors to ensure eligibility, adequate document preparation and walk a debtor through the process. Having representation is an affordable way to ensure getting the most out of a case with minimal effort.
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