“I’m interested in filing for bankruptcy, but wondering what happens when you file.”
This is one of the most common concerns I’ve come across since first delving into the topic of personal bankruptcy several years ago – and for good reason. People want to know how filing will affect them. How will it impact their ability to borrow? Will their name end up on some public listing somewhere for family and friends to find? Will they be able to move on with their lives after filing? If there’s one thing I can tell you with complete certainty it’s that there have been lots of things written about the filing process itself, and the good news is that a whole lot of it is flat out false.
The problem with most of the advice you’ll find online pertaining to the personal bankruptcy process is that it’s misleading and could result in you making the wrong decisions regarding your finances, which is definitely not a good thing. You’re here because you want answers and I’m here to provide you with the right ones.
So, what happens when you file bankruptcy? Here are some things to expect –
- The process itself is a very public one, but not one that you’re friends and family are likely to find out about. I don’t know about you, but I definitely don’t spend my free time perusing bankruptcy lists online or at the courthouse to dig up dirt on my loved ones.
- Regardless of the type of bankruptcy you choose to file, you should expect to meet with a bankruptcy attorney to discuss the nature of your case. While attorneys aren’t required (you can file on your own), they can definitely help to reduce the learning curve that it otherwise required to file a successful claim. Be prepared for an attorney to ask you very detailed questions about your financial history – they will likely want to know about your assets, bills and other debts, and also about your household income.
- Not all debts are dischargeable in bankruptcy, so don’t expect to say bye-bye to every last cent you owe. Refer to this list for more information about which debts are dischargeable and which ones might not be.
- Expect to complete a mandatory credit counseling course – this can be done online or in person.
- Plan to attend a meeting with your attorney (if you elect to use one) and some or all of your creditors (a.k.a. the people who you owe money to). This meeting is referred to as the 341 Meeting and is not an opportunity for your creditors to berate you; rather, it’s an opportunity for them to question your ability to repay your debts.
- You should expect to attend a mandatory financial management class, which is a good thing since it will teach you how to better manage your money going forward.
- Post-filing you should expect to receive a discharge of your debts, which means that you are free to start your financial life anew.
Although filing bankruptcy will ultimately result in some or even most of your debts being forgiven, there are some fairly significant consequences that you must be aware of, the most important of which are listed below –
- Financing will be difficult to obtain after filing a claim – Not that you should be looking to rack up debt right after filing a claim, but there will likely become a time when borrowing money will be a necessity, even if it’s simply in the form of a standard credit card. The hard truth is that it will likely take several years before you are able to borrow at reasonable rates, as it can take up to 10 years for a bankruptcy claim to be removed from your credit report.
- Filing itself can be time consuming and expensive – It seems sort of backwards that it will actually cost you money to file bankruptcy, but it’s an unfortunate reality. Cost can be divided into two categories – mandatory filing fees and voluntary fees associated with hiring an attorney. In terms of the filing fee, you can expect to pay about $300 to file Chapter 7 and attorney fees can amount to as much as $1,500 per individual case, though exact amounts can vary.
If you think that the personal bankruptcy process might be an option that you’d like to pursue, but aren’t quite ready to make a commitment, consider filling out our free bankruptcy evaluation. The process itself is quick and will place you into contact with an attorney at no obligation.
To learn even more about claiming bankruptcy, consider reading the following articles on our site: