If you are faced with mountains of debts and have no resources to pay off your creditors, a promising option is to file for bankruptcy. Filing for bankruptcy will discharge you of all your non-secured debts, leaving you with a fresh start and a chance to better manage your finances. The downside however is that it will reflect on your credit rating and it will give you a harder time to obtain loans and financing in the future. Here is some information to help you out with regarding filing for bankruptcy.
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What to file
You can go about filing for bankruptcy two ways. One is filing for a Chapter 7 and the other is filing for a Chapter 13. Filing a Chapter 7 bankruptcy discharges you of non-secured debts by liquidating all your non-exempt assets. This will be done by the bankruptcy trustee and he will also distribute the converted cash from the liquidation to your creditors. Secured debts are those with pledged collateral like mortgages and car loans. In these cases, there will simply be a foreclosure for any unpaid debts. On the other hand, filing a Chapter 13 will allow you to pay off your debts in three to five years but you have to propose a payment program. This allows you to keep your non-exempt assets. This is best for people who have a steady flow of income and stable employment.
How to file
Before anything, it is best to seek legal advice so that you will know if filing for bankruptcy is the right thing for you. Filing for bankruptcy, however, does not necessarily require a lawyer. You can just fill up the bankruptcy forms that can be obtained from your local court. These forms will contain your personal information, financial activity, expenses, secured and non-secured debts, creditors, information, assets, taxes, and other related information. This will thus serve as your petition that you will file to the court. You need to submit three copies plus one original copy. The court will order a provision that prevents your creditors from seizing any of your property within a month's time. After a month, a meeting with you and your creditors will be called for by the court. This is also called a 341 meeting. When a compromise is finally settled, all your assets will be liquidated by the trustee and then distributed to your creditors. A notice from the court will be sent to you within 60 to 90 days informing you of your discharge from your debts.
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