What should you know before and after entering bankruptcy protection?
Bankruptcy protection is a legal process by which you can pay off your debts keeping your assets intact. A business or an individual can enter bankruptcy protection if it becomes impossible to make payments to the creditors. There are 2 main objectives for consumer bankruptcy. They are –
* To give debtors a fresh start.
* To pay all the creditors as much as possible without unduly burdening the debtor.
The decision to enter bankruptcy protection is a very serious one and should be considered as the final alternative. It’s an extremely difficult decision to take and it is always a good idea to take the help of an attorney who has the experience of such cases.
There are a few important steps that one needs to follow before and after entering bankruptcy protection. They are –
Step 1: Keep records of all your financial documents
Make a list of all your debts and assets, personal banking account statements and tax forms so that the federal bankruptcy court representative can properly evaluate your case. You should also carry copies of your last three tax returns when visiting your attorney.
Step 2: Pre-bankruptcy counseling
Before a debtor can file for a bankruptcy, he must take a pre-bankruptcy counseling from an approved credit counseling company. It includes assessment of the debtor’s financial situation, a personal budget plan and a discussion to find any alternative to bankruptcy. The session generally lasts for an hour and can be taken over the phone, online or in person.
At the end of the counseling session, you’ll be provided with a certificate of completion of the session and a repayment plan. Both these documents are required to file for a bankruptcy protection.
Step 3: Bankruptcy petition
The next step in entering bankruptcy protection is filing the bankruptcy petition. In the bankruptcy petition, you’ve to enter various information like your current income and expenses, all creditors’ names, the amount owed to them and all your assets. A court appointed bankruptcy lawyer will asses your petition and determines your eligibility to file the particular bankruptcy chapter, e.g. Chapter 7 bankruptcy, chapter 13 bankruptcy. Filing the bankruptcy petition will stop the harassing collection calls from your creditors as they’re given a notice from the court informing your filing for bankruptcy protection.
Step 4: Attend court meetings
Attending federal court meetings with your trustee or creditors is required to successfully enter bankruptcy protection. However, as long as your paperwork is in order, your attendance in the court will be minimal.
Step 5: Make payments on time
No matter whichever bankruptcy chapter you file for, try paying all your scheduled payments on time in order to preserve your assets. If you’ve filed for a chapter 13 bankruptcy, your debt repayment term will be around three to five years, depending on the amount you can pay each month.
Try to be honest about your financial affairs while entering bankruptcy protection. Lying or hiding assets can be deemed as a federal crime punishable by possible prison term.