How To File For Chapter 7 Bankruptcy
If you’re considering filing for Chapter 7 bankruptcy, here is a 10 step breakdown of what will be involved in the process.
- Examine your debt. Some debts are not dischargeable in Chapter 7 bankruptcy, like child support obligations and some student loans. If you pledged collateral for a debt, the lender can take the property if the debt isn’t paid.
- Verify your asset exemptions. Every state has exemption laws which dictate what types of property you can keep if you file for Chapter 7 bankruptcy. In some cases, these laws will determine how much equity you have in particular types of property.
- Confirm your eligibility. If your average income for the last six months before you file is more than the median income for a family of your size in your state, you might not be allowed to use Chapter 7 bankruptcy, depending on your income and debts.
- Redeem or reaffirm secured debts. If you promised property as security for a loan, you’ll need to satisfy the creditor in order to keep the property. When you file for bankruptcy, you’ll be asked whether you want to redeem the property, reaffirm the debt, or surrender the asset. Redeeming the property means you’ll pay the creditor the current replacement value of the property. Reaffirming the debt means you’ll agree on new contract terms with the creditor. Surrendering the asset means you’ll let the creditor take the property, though if the property holds no value the creditor might not care to repossess it.
- Fill out the necessary bankruptcy forms. This is a lengthy process with many forms needing to be completed. You’ll tell the court, through these forms, about your assets, debts, income and expenses. You’ll name all of your creditors, label all disputed debts, make your exemption choices, and decide how you want to handle each of your secured debts.
- File the forms. Filing your petition for bankruptcy officially starts your case. While most people file all the forms simultaneously, you can file a two-page form if you need to file for emergency bankruptcy. If you file in the emergency bankruptcy manner then you’ll need to complete the remaining forms within 14 days.
- Go to a meeting. In many bankruptcy cases you’ll only make one court appearance. You’ll meet with the trustee and perhaps some of your creditors to review your case and answer any questions about the information in your documents.
- File any necessary objections or motions. If you dispute a lender’s claim against you (or if you want to eliminate certain liens) you’ll need to address these matters before your case is closed.
- Act on your secured debts. When you filed for bankruptcy, you filled out a form which stated how you would handle your secured debts. Before your bankruptcy case is over, you’ll need to wind up your secured debts.
- Receive your discharge. At the end of your bankruptcy case you’ll be issued an order by the court stating that your dischargeable debts are all officially discharged. Once a debt is discharged you have no legal commitment to pay and the creditor has no legal ability to demand it.