Filing bankruptcy is a hard decision to make. There are many questions you may have concerning bankruptcy and how it will work for you. There are two basic types of bankruptcy for individuals: Chapter 7 and Chapter 13. The following describes the major differences between them, how to file bankruptcy and information about the required certificates you will need to obtain during the bankruptcy process.
*If you are ready to complete a Bankruptcy Certificate, please click on the link and you will be taken to the appropriate page to start your counseling or education course.
TYPES OF BANKRUPTCY
In Chapter 7, your unsecured debt is discharged and you repay nothing to your creditors. Unsecured debt includes credit card, medical bills, past utilities bills, etc. In other words, there is no collateral attached to the debt. Before you can file a Chapter 7, however, you must pass a "means test" to determine if you qualify. The means test is based on your income and the median income for a family your size for your region. Also, some of your personal property is exempted under Chapter 7 but some may not be and therefore you may need to consider other options based on your situation.
Chapter 13 is called a reorganization bankruptcy because it reorganizes your debt. You pay a portion of your debt back under a scheduled three to five year repayment plan. Once you have completed your payment plan, the rest of the debt is forgiven. The payments go to the court and your program is managed by a court appointed trustee.
Be aware that not all debt can be discharged in either bankruptcies. Overdue child support must be paid in full in a Chapter 13 bankruptcy and it will be included in your payment plan. Also, if you own a business, those debts are treated differently than consumer debts when it comes to deciding eligibililty for filing Chapter 7. Chapter 13 will let you keep your assets in an ongoing business and use your business earnings to make required payments.
Are you confused yet? I don't blame you. There is a lot of information to cover and each person's situation is different. To recap so far....you have two choices in filing; Chapter7 or Chapter13. Chapter 7 discharges your debt and Chapter13 reorganizes it into a repayment plan. You have to pass the means test with an income below the median income for your family in your area in order to qualify to file a Chapter7.
HOW DO I FILE BANKRUPTCY?
You have three choices in which to file a bankruptcy. You can file it yourself, hire a document preparer or hire an attorney to represent you. Each situation has its pro's and con's.
File Yourself (also called Self Filer):
You will need to download or pick up the proper petition packet from you bankruptcy court. You will be responsible to complete all of the required forms in an accurate manner. You will need to gather documentation to support the forms you complete. You will sign a statement that all of the information is accurate and complete. You pay the court costs (around $300.00) and file your petition. There will be a "341 meeting" arranged by the court. In this meeting, a trustee will go over your bankruptcy petition and make sure you have all of the supporting documentation. This meeting is also called a creditors meeting because they can be there as well to represent their side of the case. You will represent yourself in this meeting and respond to the trustee's questions. Usually if the petition is filled out correctly and all of your support documentation is there, the meeting goes smoothly.
Using a Document Preparer or ParaLegal:
You can hire someone (a document preparer/paralegal) to help you fill out the petition just as you hire someone to prepare your taxes. You still have to gather all of the information but they will help you make sure your petition is completed correctly. They cannot give legal advise. They can only fill in the information you have given them. You will still sign a statement that all of the information is correct. You are still considered a "self filer" when using a document preparer/paralegal. They cannot represent you at the 341 meeting. The cost is around $175.00 plus the court costs.
Hiring an Attorney:
The question of who to hire is not simple. There are many attorneys offering bankruptcy services. The initial session with the attorney will cover most questions you may have. Think ahead and be prepared for the meeting. Write down you questions so you don't forget. You may also want to bring your budget and a list of your debts for their review. This may be the only meeting you have with your attorney until the signing of the petition or even the 341 meeting. Your case is usually handled by a paralegal in the attorney's office. They will be responsibile for collecting the required information from you for the bankruptcy petition. While the attorney will represent you at the 341 meeting, they are not good at holding your hand. Do your research before hand so you understand the bankruptcy process. Check out The New Bankruptcy by Nolo Press. There are 366 pages full of information concerning bankruptcy. Also, the Middle District of Florida offers a video called Bankruptcy Basics that you may find helpful in understanding the bankruptcy process.
REQUIRED CERTIFICATES FOR BANKRUPTCY
There are two certificates required in order to complete your bankruptcy. The first one is called a Counseling or Briefing Certificate (click this link if you are ready to take the course). You must get this one before your petition is filed. You will need to contact an approved credit counseling agency to complete the counseling. It covers information on your income, expenses, assets and liabilities. It also goes over the unsecured and secured debt. The goal of the counseling is to make sure you feel that bankruptcy is your best option. It takes about an hour to complete. At Family Life Resources you can take the counseling online, by phone or come into our office. The cost is $25.00 per person online or $50.00 by phone or in the office. If you are filing with a spouse, we only charge a total of $75.00 for both of you if by phone or in the office instead of $100.00. Your certificate is emailed to you and your attorney if you have one.
The second certificate is required after you file and have a bankruptcy case number and before your bankruptcy can be discharged. It is called a Personalized Financial Management Course and is very different then the first program (click the link if you are ready to take the course). This second course consists of various topics on finances, credit reports, insurance, protection laws, etc. It will help you understand how to rebuild your credit. The course is required to be two hours in length and has a pre-test and post-test option. At Family Life Resources we offer the class either on line or in a classroom setting. The cost is $25.00 each online or $50.00 per household in a classroom setting. Again, your certificate is emailed to you and your attorney should you have one.
If you have more questions concerning bankruptcy , please see our blogs concerning the subject. You are welcome to call Family Life Resources at 813-989-1900 or 800-553-8621 and speak with a Certified Credit Counselor at no cost to you. Our office hours are 9:00 AM to 5:30 PM Monday - Friday. We hope this information has helped. Don't forget, you can also find us on Facebook and Twitter for our latest updates.