FindLaw KnowledgeBasePublished: 2013-01-17
Staying ahead financially is difficult in today’s economy. Under certain circumstances, people will find that bankruptcy is the best solution.
Signs that you may be heading toward bankruptcy
Trouble making payments, living off credit cards or cash advances to pay bills and harassment from creditors are just a few signs that a bankruptcy may be looming. Other signs include:
- No emergency savings
- No health insurance
- Large student loan debt
- Denial of credit or loans
When it becomes impossible to pay bills, bankruptcy may become a necessary last course of action.
Timeline of the bankruptcy process
Stop using credit cards immediately after deciding to file for bankruptcy. Additionally, do not make any luxury purchases; filing for bankruptcy shortly after making a luxury purchase is often considered an act of fraud under bankruptcy law.
Prepare a financial checklist, including the following items:
- Asset and liability statements
- Bank statements from the previous three months
- Names, addresses and phone numbers of all creditors
- Pay stubs or copies of unemployment checks from the previous six months
- Three years’ worth of tax returns
Include any items related to a divorce or child care as well — for example, divorce decrees or court orders for maintenance or child support. Make copies of any correspondences with creditors. Finally, do not forget any mortgage paperwork or vehicle titles.
About a month before you plan to file, find an attorney who concentrates in consumer bankruptcy law. He or she will use the certificate if you have been through credit counseling, prepared financial checklists and documents and copies of written communications with creditors to initiate the bankruptcy process.
Credit counseling is mandatory within six months of filing for bankruptcy. This session gives a qualified credit counselor the opportunity to determine how the negative financial situation arose and develop methods to keep it from happening again. Sessions usually last around 90 minutes, and the counselor provides a certificate upon completion.
Additional bankruptcy information
Remember that the bankruptcy process does involve attorney fees and costs. Because every case is different, fees vary by case. Costs included in every case include:
- Bankruptcy filing fee $306.00 for a Chapter 7 and $281.00 for a Chapter 13
- Credit counseling fee typically $30.00 to $50.00
Additional fees are normally charged if there are modifications to the bankruptcy petition or further litigation, and other feels may be imposed throughout the process. A good lawyer will advise you of these potential fees and costs in advance and will provide you with a written fee agreement that sets out your responsibility to pay those additional fees and costs if they arise.
An automatic stay is imposed upon creditors immediately after a bankruptcy filing, preventing them from making any further collection attempts. The automatic stay is designed to provide the individual with some breathing room and time to organize finances.
A meeting with the bankruptcy trustee is held one to two months after filing. Although uncommon, creditors may be present at this meeting. If no further complications arise at this meeting, a discharge notice is usually sent within eight weeks.
An individual with overwhelming debt considering filing for bankruptcy can benefit from an experienced local bankruptcy attorney. The attorney can explain all available legal options and provide guidance through the complex bankruptcy process.