Bankruptcy is a procedure carried out by the court. A court trustee and the judge examine the liabilities and assets of people and businesses that can’t pay their bills. Afterwards, the court decides whether to dismiss those debts or not. Once declared bankrupt, the entity is no longer required to pay these debts.
Basics of Bankruptcy
Bankruptcy laws are meant to give people a second chance to start over. Whether you took a mortgage and couldn’t repay or you took a student loan and failed to get a job, declaring bankruptcy can help you get rid of these debts. Bankruptcy can delay or prevent a foreclosure, stop debt collection, and even prevent car repossession. But the main concern for most people is how to file bankruptcy yourself.
It’s important to note that there’s no perfect time for filing for bankruptcy. You need to evaluate your situation and how long it will take to pay off all the debts. You can either hire an attorney or learn how to file bankruptcy yourself.
Read on to learn the necessary steps on how to file bankruptcy yourself.
1. Get the Necessary Documentation
You need to itemize your current income sources to begin the bankruptcy process. The paperwork includes:
- Asset Information – Get documents that provide information on the assets you have. This includes 401 (k), IRA, bank accounts, vehicle value, and life insurance policies.
- Tax Returns – You need to submit tax returns for the last two years for Chapter 7 bankruptcy cases, and four years for Chapter 13 bankruptcy cases.
- Income Verification – If you have some type of income other than employment, you need six months of pay stubs or a form of income verification to complete this process.
- Creditor Information -Take time and get information on all the creditors you owe money to, including the estimated amount and their addresses. You can also get a credit report to determine how much you owe.
2. Complete Credit Counseling
You need to undergo a six months credit counseling session from an approved agency before putting up a petition. The session costs less than $100 and will only take an hour or utmost two. It’s critical to have your financial inventory on hand to ensure that you get the most out of your counseling appointment.
The agency will help you determine which type of bankruptcy to file. In case you choose a Chapter 13 bankruptcy, the agency will help you with the payment plan. You’ll need to provide proof that you underwent credit counseling when you file your petition. Also, note that you need to have attended the session within six months of filing. You will need to retake the class if your credit counseling certificate expires.
3. Fill Out the Petition and Schedules
How to file bankruptcy yourself also needs you to complete the petition and schedules, and later file them with the court. These documents can be obtained online. The court in which you need to file your petitions and schedules is dependent on where you’ve lived in the last six months. Also, you need to attach your last two months of pay stubs to your Debtor’s Certificate of Employment Income.
4. Submit Tax Returns to Your Appointed Trustee
Each bankruptcy case is assigned to a specific trustee. You need to provide the trustee assigned to your case with details of the last two years of filed state and federal tax returns. In case you haven’t filed for years, provide your trustee with details of the last filed state and federal tax returns. Do not forget to include all the forms and schedules that were completed when submitting tax returns.
At this point, your trustee has all the information, and it’s up to the court to decide whether or not you’re eligible for Chapter 7 protection. Failing to pass the test means that Chapter 7 eligibility may not be granted. Nonetheless, you can still file for chapter 13 bankruptcy.
5. Attend Hearing
A 341 hearing is scheduled after your bankruptcy case is filed in court. You need to bring proof of identification and social security during the hearing. You’ll also need to carry documents like property deeds, pay stubs, tax returns, car titles, copies of recorded mortgage, and bank statements.
During this hearing, the trustee asks you questions regarding your income, assets, and creditors. The questioning lasts for five minutes as they only require a yes or no response.
6. Finish Debtor Education Course
Getting to this stage at least gives you an idea of how to file bankruptcy yourself. However, before you get all excited, you still need to complete a second course known as a debtor education course after you file your paperwork. After the class, you need to file a B23 form. This document gives the court proof that you’ve finished the course.
7. Get Your Discharge
This is the final step on how to file bankruptcy yourself. The court issues an order saying that all your qualifying debts have been discharged. This means that you are under no obligation legally to pay any qualified debt. Also, the creditor has no right to demand payment from you.
The discharge papers arrive within three months after your 341 hearing in a Chapter 7 bankruptcy. If you read on how to file bankruptcy yourself and filed for a Chapter 13 bankruptcy, you’d receive your discharge after making the necessary repayment plan payments and after completing the debtor education course.
How to File Bankruptcy Yourself – Final Word
Understanding how to file bankruptcy yourself can be overwhelming and sometimes complex. However, if you feel that you’re up for it, follow the above steps to file for bankruptcy successfully. It is wise to file for Chapter 7 bankruptcy if you’re experiencing financial problems and your creditors are pressuring you.
Are you thinking of how to file bankruptcy yourself? Let us know what your struggles are and what other things someone should watch out for in the comments section.