What is involved in filing for bankruptcy?

Yes, although it is hard. You may lose property or other rights if you do not know the law. It takes patience and careful preparation to file a case and do the work needed to get the discharge at the end.

Chapter 7 cases are easier than Chapter 13 cases to file and get to the end of. Very few people can file and get to the end of a chapter 13 case on their own.

Upsolve is a nonprofit with a free online tool that can help you file Chapter 7 bankruptcy on your own if you have a simple case.

Document preparation services or “typing services” or “paralegal services” are non-lawyers who fill out bankruptcy forms for a fee. They are a bad idea. Non-lawyers cannot give advice and they do not help after the case is filed. There are many shady companies who give bad advice and defraud consumers.

Ask family, friends, and any lawyers you know and respect for a recommendation. Look for someone who will meet with you alone and answer your questions. Carefully read retainers and other documents the lawyer asks you to sign. Do not hire a lawyer unless they agree to help you for the whole case. See also Find a Lawyer to find legal aid programs that help with bankruptcy.

Remember the person advertising the cheapest rate is not always the best. Many of the best bankruptcy lawyers do not advertise at all.

Think about these questions before you first meet with a bankruptcy lawyer:

• What debts are causing you the most trouble?
• What are your most valuable assets? Assets are the things you own like your house, bank account, retirement account and stocks.
• How did you get your debts?
• Are your debts secured?
• Are any of these happening now or about to happen:
  • foreclosure or repossession of property, 
  • taking money from your wages or bank account, or 
  • shutting off a utility?
• What do you want by filing the case?
   

It costs $338 to file a Chapter 7 bankruptcy and $313 to file a Chapter 13 bankruptcy case. It is the same price for a married couple to file.

The court may let you pay the Chapter 7 or 13 filing fee in smaller payments over time if you cannot pay it all at once. If you hire a lawyer, you will also have to pay the lawyer’s fees.

You may be able to pay no filing fee in a Chapter 7 case. You can only ask the court to waive the fee if:

• you are unable to pay the filing fee over time, and
• your household income is less than 150% of the federal poverty guidelines.

The filing fee is never free in a Chapter 13 case. You must pay it in full or in installments.
 

You must take a budget and credit counseling course from an approved credit counseling agency no more than 180 days before you file for bankruptcy. The counseling agency gives you ways to deal with your money problems. They also go over your budget with you. You can do the counseling in person, by phone, or online. Before you file for bankruptcy, you must have a certificate from the agency that says you did the counseling.

Most approved agencies charge between $30–$50 for pre-filing counseling. If you cannot afford the fee, ask the agency to let you take the course for free or at a discount.

Some approved agencies offer Debt Management Plans (DMPs). A DMP is a plan to repay some or all of your debts. You send the counseling agency a monthly payment that it uses to pay your creditors. Do not do a DMP if you will not have enough money to pay your ongoing expenses like rent and food while you are also paying the monthly amount to the counseling agency.

Debt management plans are helpful for some people. For others, they are a terrible idea. Do not do a DMP if it will not fix your money problems.

If you are thinking about a DMP, remember:

• Bankruptcy may be the best choice for you.
• If you sign up for a DMP that you cannot afford, you may have to file for bankruptcy anyway. If that happens, a copy of the DMP is filed in your bankruptcy case.
• Some approved bankruptcy counseling agencies do not offer DMPs.

Note 

A credit repair company is not the same as a credit counseling agency. Credit repair companies also collect monthly payments to pay off your debts and they may be able to fix mistakes on your credit report, but beware of scams. 

Meet with a lawyer before you take the credit counseling course. A credit counselor cannot give legal advice. But a lawyer can help you figure out if bankruptcy is your best choice. A lawyer can also give you ideas to fix your money problems.

A lawyer will give you a list of approved credit counseling agencies, or you can find one at the U.S. Department of Justice website.
 

Usually no. In most cases you only have to go to a “meeting of creditors.” At the meeting of the creditors you meet with the bankruptcy trustee and sometimes some of your creditors. Usually this meeting is quick. You are asked a few questions about your bankruptcy forms and your money situation. Your lawyer goes with you.

You may have to go to a court hearing if:

• there is a problem,
• you are fighting about a debt, or
• you do not stay up to date on your secured debt.

In a Chapter 13 case, you may also have to go to a hearing when the judge approves your plan. If you need to go to court, you will receive notice of the court date and time from the court and/or from your lawyer.

After your case is filed, you must take a second credit course. This is a course in personal finances. This course takes about 2 hours. You can take the course in person, online (usually by watching a video), or over the phone. Your lawyer can give you a list of approved debtor education providers, or you can find one at the U.S. Department of Justice website.

It costs money to take this course. If you cannot afford the fee, ask the agency to let you take the course for free or at a discount. In a Chapter 7 case, sign up for the course right after your meeting of the creditors. If you file a Chapter 13 case, ask your lawyer when you should take the course.