To file for bankruptcy you must complete the right forms and file them in Bankruptcy Court. The forms you need include a “petition” and "schedules" that give information about your finances.
The Bankruptcy Court charges filing fees:
- $335 for Chapter 7 bankruptcy. You can ask to waive the fee if your income is lower than 150% of the federal poverty guidelines and you cannot afford the fee or you can ask to pay it in 4 smaller payments called installments.
- $310 for Chapter 13 bankruptcy. You can ask to pay this in 4 smaller payments called installments.
Can I file for bankruptcy?
To file for bankruptcy you must:
- Live in the United States; and
- Take a course with an approved non-profit budget and credit counseling agency, no more than 180-days before filing (unless an exemption applies).
You cannot file for bankruptcy if:
- You are in the middle of a bankruptcy case now; or
- Your bankruptcy case ended in the last 180-days because:
- you did not follow a judge’s order on purpose, or
- did not appear before the court when you were suppose to go and did not do the required steps in the case (failure to prosecute the case), or
- you asked that the old case be dismissed after a motion for relief from the automatic stay was filed.
But if your bankruptcy case ended more than 180 days ago, and you live in the U.S., and took the course, you can file.
You can file as an individual or jointly with your spouse, but your spouse must meet the same conditions you have to meet.
What happens after I file the case?
Meeting of the creditors
After you file the case the Bankruptcy Court sends you a notice with a date and time for a "meeting of the creditors." Go to the meeting. All of your creditors are invited to the meeting.
You meet with a "trustee”. The trustee makes sure the information on all of forms and papers in the case are correct. The trustee asks you questions about the case. He or she may ask you about:
- your income and expenses,
- your taxes,
- your assets, and
- why you filed for bankruptcy.
The creditors can come to the meeting. They can look at the papers you filed and ask you questions. Most creditors do not come to the meeting.
Sometimes the trustee will ask for more documents like pay stubs, bank statements, and pension documents. You must give the trustee the documents he or she asks for.
Many of your assets are protected so the trustee cannot take them. These are called exempt assets. If you have non-exempt assets, the trustee may ask you to give him or her these assets. The trustee will sell the assets and give the money to your creditors. You may be able to keep some of these assets if you can give the trustee the same amount of money he would get from selling them.
After the meeting of the creditors you must take a second debt education course. You also had to take a credit counseling course before you filed for Bankruptcy. You need to file proof that you took the course with the Bankruptcy Court.
Can I discharge my debts?
Even if you can file for bankruptcy, sometimes you are not “eligible for a discharge.” You will still owe the debt.
You are not eligible for a discharge if you:
- got a discharge in a Chapter 7 or Chapter 11 case in the last 8 years;
- got a discharge in a Chapter 12 or Chapter 13 casein the last 6 years, except for two exceptions under the law; or
- you did not complete the second credit counselling course while the judge is deciding your case.
Even if you cannot get a discharge, you may want to file for bankruptcy because you can stop creditors from repossessing your things or foreclosing:
- usually you get an “automatic stay” that stops creditors as soon as you file, but it does not always last.
- In a chapter 13 bankruptcy, you can pay back missed payments. If keep up your payments, you can stop a foreclosure or repossession all together.
Life after Discharge
Many people worry about bankruptcy and their credit. A bankruptcy becomes part of your credit history for 10 years. You may still get credit. But it is often on very bad terms with high interest rates and annual fees.
It is illegal to discriminate against someone for filing for bankruptcy.
- The government usually may not decide not to hire you because of a prior bankruptcy.
- Housing authorities and student loan agencies cannot deny a person because of bankruptcy.
- Utility companies may not refuse you services because you declared bankruptcy.
- Private employers cannot refuse to hire you or lay you off or fire you because you declared bankruptcy.
However, companies can decide not to give you the choices they give other people who have not filed for bankruptcy.
You can rebuild your credit as soon as your bankruptcy ends. Only apply for credit when you know you can afford it. Only use it for what you can pay off in full at the end of the month.