If you are one of the millions of people who are drowning in debt, perhaps claiming bankruptcy is the answer to your financial problems. Rather than paying thousands of dollars for a lawyer, many prefer filing bankruptcy on their own – a process commonly referred to as self bankruptcy. Choosing this route can be disastrous if you are not fully aware of the rules; therefore, it is best to at least attend a free initial consultation with a reputable bankruptcy attorney before deciding which path is best for you. The laws also differ slightly from state to state, so make sure you thoroughly research the requirements applicable in your area.
Basically, if you are interested in declaring yourself bankrupt, you need to figure out just how much debt you have and what type of debt it is. Compile a list of all your credit cards, medical bills, car loans, mortgage payments, etc. Then add all your monthly expenses, including rent, utilities, car insurance, and even your groceries. This will help you get a good picture of where you are financially.
Chapter 7 of the U.S. Bankruptcy Code is a traditional form of liquidation for those who are having trouble paying their unsecured debt, which is debt that is not tied to your assets. This can include credit card or medical services debt. If most of your debts are ‘secured’, you may want to consider consolidating them and repaying them under Chapter 13 instead. This would be a good topic to discuss with a bankruptcy attorney during an initial consultation.
After you have organized your financial documents and analyzed debts, you will need to conduct a Means Test. This can be done for free on the internet then filled out on the appropriate form when it comes time to complete the official documentation. The Means Test takes into account your income and expenses, and determines whether you are eligible to file a personal bankruptcy claim under Chapter 7 or 13. The idea behind this test is to identify those persons who have enough disposable income to repay their debts, compared to those who would be unable to do so due to their income and the cost of living in their state.
Now comes the complicated part of completing the documents. Go down to your local Bankruptcy Court to pick up the papers in person as some states have full-time clerk who is responsible for helping those who opt for self bankruptcy, rather than using the services of a lawyer. They are unable to provide you with legal advice but can help you understand what information you need to fill-in on the various forms. If this service is not available in your area and you are having trouble, it might be best to consult a Bankruptcy Petition Preparer (BPP) who will complete the documents for you, based on the information you provide. This can be a huge time-saver and stress-reliever.
After you have filed your documents and paid the fee of about $300 at the Bankruptcy Court, you will probably have to wait a couple of months for your 341 Meeting. This meeting is set-up to give your creditors the opportunity to object to your self bankruptcy process. It is also when you must declare that your have not provided any false information on any of the documents pertaining to the declaration of bankruptcy. If everything goes smoothly, your debts should be discharged after 60 days of this meeting. Make sure you check your financial record to verify that it lists your balance due as ‘zero’. This way you will be able to start rebuilding your credit score as quickly as possible.
If you have opted for self bankruptcy, check to see whether your state requires that you attend any credit counseling prior to being allowed to file. This is usually an hour long conversation that can be done in-person, on the phone, or online in which you discuss any other options that may be available to you. The average cost is $50 but will be waived if you are unable to pay it. You will be given a certificate of completion at the end of the course with may need to be included with your bankruptcy filing. Your state may also require that you attend post-filing debtor education which includes information on managing money and developing a budget. This is slightly longer than the pre-filing course and can cost up to $100. If you are unsure of the requirements in your state, make sure to bring this up during your consultation with a bankruptcy attorney.
Filing for bankruptcy yourself is a way to save hundreds, if not thousands of dollars in legal fees but you must make sure that you fully understand the bankruptcy process prior to filing, as there are fines and repercussions for filing incorrectly. If you choose to do this without the aid of a lawyer, organization and preparedness will be key in a simple and straightforward bankruptcy filing.
To determine whether the personal bankruptcy process is right for you, consider filling out our free bankruptcy evaluation.