The decision to file Chapter 7 bankruptcy and address your overwhelming debt is one that should not be taken without careful consideration and research into the advantages and disadvantages that filing bankruptcy offers. Chapter 7 Bankruptcy is for individuals who are buried under a mountain of debt and are struggling just to stay afloat. It affords these individuals a way out from under crushing debt and gives them a fresh financial start.
Once an individual has made the decision of filing Chapter 7 bankruptcy they must first decide if they want to file a do-it yourself bankruptcy or use the expertise of an experienced bankruptcy attorney. This is a personal choice and it depends on the individual's personal financial situation as everyone is different. However, it is recommended that every debtor should at least have an initial consultation with a bankruptcy attorney to gain information and discuss their options. Most bankruptcy attorneys offer a free consultation and the information can be invaluable, even if the debtor feels that they can file bankruptcy on their own.
To begin the process the debtor must gather all of the necessary information. This includes a detailed list of monthly living expenses, monthly income (source, amount and frequency of income), ALL creditors as well as their addresses and amount of debt owed, and a complete list of all of the debtor's property and assets ( including bank accounts, household belongings, clothing, jewelry, tools for personal and work use ). All of this information must be put into the bankruptcy petition. The completed petition is then filed with the local federal bankruptcy court in the district that the debtor resides in. A list and location of all federal bankruptcy courts can be found online to determine which one to file at for the do-it-yourselfer. Once the petition is filed with the bankruptcy court, the court issues the automatic stay which stops all collection actions and prohibits the creditors from initiating or continuing with any lawsuits and/or wage garnishments.
The bankruptcy court will then notify the debtor of the 341 meeting or creditors meeting which usually takes place about 20-40 days after the petition has been filed. The debtor must attend, even if they are represented by an attorney. The debtor will be sworn in since it is a court of law and asked several questions by the bankruptcy trustee. The purpose of the meeting is for any creditors (if they even show up) to question the debtor regarding the debt or the ability to repay it. Most creditors won't waste their time or money trying to pursue the debt repayment since it will most likely be wiped out in the Chapter 7 bankruptcy discharge anyways.
The debtor must make sure that they comply in a timely manner with all of the court requirements during the bankruptcy process, such as the credit counseling course and the financial management course. If not, the debtor's case will be dismissed without a discharge. If the debtor completes everything on time, the court will issue the debtor their discharge notice in the mail within about 60-90 days following the 341 meeting. With the discharge notice in hand, the debtor is officially released from all personal liability for all of the discharged debts. The next thing to do is enjoy being debt free and begin rebuilding your credit.
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