Steps for Filing Bankruptcy
If you are convinced that the best way for you to deal with debts and creditors hounding you is to file for bankruptcy, then you might as soon prepare yourself for the process.
And the first step you can do is to aware the steps involved so that you can go through it easily. Find out what these steps are from our guide.
Bankruptcy carries with major consequences like the possible loss of property or the tainting of one’s credit record, and so it is often recommended by bankruptcy experts as a last recourse. Unless, you are unemployed, unable to work and facing large medical bills, you would most likely be advised to find other ways to remedy your indebtedness before filing for bankruptcy. But if bankruptcy is the best option you’ve got, faced with insurmountable bills and creditors threatening to foreclose on assets, then you might have to prepare yourself to file for bankruptcy. There are particular chapters of the U.S. Bankruptcy Code under which individuals, businesses and special sectors of the society may file.
You may represent yourself when filing for bankruptcy or you can consult a lawyer to help you. These are the bankruptcies available for individuals and businesses and the steps in filing them:
Chapter 13 Bankruptcy Filing
- Determine whether you are eligible to file for Chapter 13 by checking the amount of your secured and unsecured debt (these benchmarks vary by year). To check for qualification, visit www.usdoj.gov for details.
This filing is only for individual or married debtors, and self-employed people. Bankruptcy for unincorporated businesses cannot be directly brought under Chapter13, but an individual may include a business when filing for personal bankruptcy.
- Determine which business debts you can file under Chapter 13
- File specific forms with the appropriate bankruptcy court. The filing would require disclosure of assets, liabilities and creditors with their addresses and the type of debts they hold -- unsecured or secured.
- Pay the required processing fees
- With a credit and debt counselor, create a three to five-year payback plan
- Submit the payback plan to the court
- If the court approves the plan, you will be given time to execute the plan and your debt will be discharged after successful execution of the plan.
Chapter 7 Bankruptcy Filing
- Determine whether you are eligible for a chapter 7 filing. To check for qualification, visit www.usdoj.gov.
- File specific forms with the appropriate bankruptcy court. The filing would require disclosure of assets, liabilities and creditors with their addresses and the type of debt they hold. In this filing, you can state any exempt business assets that you think you might save from being liquidated.
- Expect that the court will appoint a bankruptcy trustee to oversee the case
- The first meeting of creditors will then be held. Within 30 days of the first meeting of creditors, the trustee will have issued what he has to say about the exemptions
- Comply with court orders that will govern the Chapter 7 process
- Cooperate with the trustee’s efforts to sell assets to pay debts
Chapter 11 Bankruptcy Filing
- File a bankruptcy petition with the bankruptcy court that includes a list of creditors (and the type of debt, whether secured or unsecured), assets, and liabilities
- With your lawyer and financial advisor, create within 120 days of filing for bankruptcy, a plan to restructure the business
- Submit the plan to the court (the plan will be voted upon by creditors)
- Wait for the approval of the bankruptcy plan by the court
- If the plan is approved, execute your reorganization plan, if not, the creditors will be given a chance to draft another one or the trustee will; they might also request a Chapter 7 bankruptcy for you
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