Understand Your Options
Bankruptcy provides legal means of discharging debt and ending creditor harassment. Most filers can use Chapter 7 bankruptcy to discharge qualifying debts after completing a three- to five-year debt repayment plan, although certain debts such as child support, alimony, or restitution must still be repaid as public policy considerations require.
Individuals whose income exceeds what is eligible for Chapter 7 liquidation can seek relief under Chapter 13, commonly known as wage earner’s plan bankruptcy. This allows individuals with steady incomes to create manageable debt repayment plans through installment payments over three to five years.
Evaluate Your Financial Situation
There are six forms of bankruptcy – Chapter 7, Chapter 13, Chapter 11-12-13-14-15-16
In order to file for Chapter 7 and discharge your unsecured debts, you will first have to pass Part 1 of your state’s means test. This evaluates your household income by documenting all allowable expenses and subtracting them from disposable income.
Filing for bankruptcy will have long-term repercussions, yet it can offer you a fresh financial start by wiping away unsecured debt and setting up payment plans for mortgages, car loans, and other secured debts. Therefore, it’s crucial that you start rebuilding your credit immediately by budgeting wisely and managing loans and credit cards responsibly.
Thoroughly Complete the Mandatory Credit Counseling
Credit counseling sessions are required as a condition of filing bankruptcy. Make sure you consult with an approved credit counseling agency. Sessions usually last less than an hour and can take place either face-to-face, via telephone, or online. A certificate will then be given to prove the course was completed successfully.
Filers must complete a post-filing debtor education course to equip them with financial tools to avoid future debt. Once complete, their provider will send them an authenticated certificate that must be presented to the bankruptcy court to discharge consumer debts successfully. It is, therefore, imperative that filers complete these classes on schedule.
