There are two bankruptcy chapters that pertain to most people.
- Chapter 7 which is basically liquidation. Chapter 7 is primarily for people whose debts far outweigh their assets. Chapter 7 bankruptcy wipes out the debtors debts and sells off any assets that the debtor is not allowed to hold onto and distributes any monies raised amongst the creditors. It should be noted that IRS (taxes) and Sally Mae (student) debts survive bankruptcy. Also for those in pre foreclosure it should be noted that a bankruptcy filing will automatically stay a short sale as well as a foreclosure auction.
- Chapter 13 bankruptcy is for those with substantial assets who feel that if given time to liquidate some of their assets will be able to pay off their creditors and still maintain some assets post bankruptcy. For example a homeowner with a mortgage balance of $250K and credit card debt of $50K whose home has a market value of $500k but who has unfortunately lost his source of income and is facing foreclosure could file for chapter thirteen bankruptcy protection to allow him to dispose of his home by normal market methods and pay off his creditors and keep $200K for himself post bankruptcy.
Most people will use a bankruptcy attorney to assist them in filing for bankruptcy. The cost for a basic chapter 7 is in the region of $2000 which should include filing fees. However if you find yourself with virtually no assets and a large debt load it is probably worth your while considering filing Pro Se (individual without legal representation). If you have nothing to lose why pay an attorney two thousand dollars for the privelige of filing a few papers.
How to file a chapter 7 pro se.
The initial filing of a chapter seven consists of going in person to your local bankruptcy court and filing a few short documents which are available free of charge at the courthouse. You can if you wish go to your local book store and pay upwards of $25 for a bankruptcy pack which contains the same documents that the court will give you for free. These documents are also available on numerous websites for a fee however you can download them for free at Bankruptcy Forms
The filing fee for a chapter seven bankruptcy is $299. If you are paying by cash which is the best way bring the exact ammount, the clerk will not make change.
It is important to note that thanks to Mr. Bush you must now complete a pre filing consumer credit counseling course before you file for bankruptcy. This counseling is done over the phone and the certificate is mailed, emailed or faxed to you. You must bring this certificate with you when you file for bankruptcy.
Within a short period of the initial filing you must file a matrix with the court. A matrix is basically a typed or neatly handwritten list of your creditors and their mailing addresses. The purpose of this is to notify your creditors that your indebtedness to them is now the subject of a bankruptcy filing.
Next is the hard part when you must fill in the main bankruptcy forms but if you have no assets it is not all that difficult and there is a person employed at the bankruptcy court to aid pro se filers.
An appointment will then be scheduled for you to appear before a bankruptcy trustee most probably in your local registry of deeds. This is to verify that you are who you say that you are and that the documents filed with the court are true and filed without duress.
Shortly thereafter your bankruptcy will become official and you will be debtless. One further counseling session is required before the bankruptcy is complete and your debts are dismissed.
A bankruptcy stays on your credit report for up to 10 years but because you cannot file again for 10 years creditors will feel secure in offering you credit again after a short time period has elapsed exactly because of your inability to file again.
Also remember that in filing bankruptcy you will be in the best of company. Recent filers have been The Donald Me Trump himself in relation to his casino empire, General Motors and The Chrysler Corporation.
Useful links:
United States Bankruptcy Court Main Page
