How To File for Bankruptcy If You Are An Individual

Here is a quick guide to how to file for bankruptcy if you are an individual.

-  Contact a reliable bankruptcy attorney.

-  Bring along all your financial papers including outstanding bills, bank statements,paycheck stubs from the most recent six months, copies of mortgages and car loans and tax returns to your first meeting with your bankruptcy attorney.

-  Your bankruptcy paperwork, called a petition, must list every debt you currently owe. If you don't list any creditors and the Bankruptcy Court finds out, it can dismiss your case and your bankruptcy filing is over. It is also a federal crime to lie on your bankruptcy paperwork. Debtors found guilty of lying in their petition can be fined or even sent to jail.

-  Discuss your "secured" and "unsecured" debts with your bankruptcy attorney. Secured debts are those like cars and mortgages where creditors hold a security interest in the property until the debt is paid. If the debtor does not pay the debt, the creditor can reclaim the property. Loans on collateral work the same way. Unsecured debts are debts not secured by property, such as credit cards or medical bills.

-  Ask your bankruptcy lawyer if any of your debts will survive your bankruptcy or if they will be discharged, meaning you won't have to pay them after your bankruptcy is over. Debts that are extremely difficult to get discharged by bankruptcy include delinquent taxes, student loans and child support.

-  Tell your bankruptcy attorney about all the income you earned the last six months. That includes any bonuses or other one-time payments you generated. If you don't, and the Bankruptcy Court finds out, your case will be dismissed and you could be charged with perjury. The amount of your income will impact the chapter of bankruptcy you are entitled to file for.

-  Depending on the types and amounts of your debts, determine if you can and should file a Chapter 7 (also known as a Liquidation Bankruptcy) or a Chapter 13 (Adjustment of Debts) petition. You may choose Chapter 13 if you earn a regular income and are behind on your secured debts, like your house mortgage, because a Chapter 13 bankruptcy is designed to help you catch up on those payments.

-  When your bankruptcy petition is completed and you have reviewed it carefully with your lawyer, you will sign the petition in numerous places, verifying the information provided is true. After that, your bankruptcy attorney will file your case electronically, meaning online, with the bankruptcy court that oversees your district. If you don't have an attorney, you will have to file your bankruptcy either in person or via U.S. Mail with the appropriate bankruptcy court.

-  Your creditors will be notified of your bankruptcy filing since the Bankruptcy Court sends each one a document called a Notice of Commencement.

-  One of the major benefits of filing any chapter of bankruptcy is the "Automatic Stay" that goes into effect as soon as your petition is filed. An automatic stay means your creditors have to stop all collection efforts after they are notified of the bankruptcy filing.

Since it takes some time for the bankruptcy court to send the Notice of Commencement to your creditors, so if one of them calls you about your debt with them, after you have filed bankruptcy, you can simply give them your bankruptcy case number and date of filing. Doing so gives them notice of the filing and notice is what makes the automatic stay effective.

However, among the major changes enacted in the bankruptcy code is that if a debtor had a prior bankruptcy filing dismissed within too close of a time to your current filing, you might not get granted an automatic stay.

-  When a Chapter 7 bankruptcy is filed, the bankruptcy system assigns someone called a Trustee to your case. This person represents the interests of the U.S. Bankruptcy Court, and they have several responsibilties. Among them is to ensure you, as the debtor, were honest in completing your bankruptcy petition and signed it with full understanding of what you were doing. They also collect and sell your assets beyond what the bankruptcy code allows you to keep and then distributes monies raised from those sales to your creditors. However, if the Trustee declares you to have a "no asset" case, it means you can keep all of your assets and won't have to surrender anything to the Bankruptcy Court after the filing.

-  Ask your attorney which "exemptions" apply to your case. Exemptions are allowances to keep some of your assets so you won't have to surrender every last item you own just because you have filed for bankruptcy. Exemptions differ in every state and some states don't even have their own exemptions. In those states, the federal exemptions will apply.

-  After filing your bankruptcy, you (and your lawyer, if you hired one) will have to attend a Meeting of Creditors. Assuming that your court hearing goes smoothly and you comply with additional bankruptcy rules as they arise throughout your case, a Bankruptcy Judge will issue you a discharge thereafter.