5 Things To Understand About Filing Bankruptcy
Is it a regular occurrence for you to run out of money before you pay your debts? Are you regularly in a dilemma where you have to choose which creditor you want to pay, and which you shouldn’t? If so, you should consider declaring bankruptcy. When you do this, the bankruptcy court will help you clear or restructure your debt so that it’ll be more convenient for you to pay.
It’s not all debts you can get a discharge for, some factors such as the type of bankruptcy you file for, your financial capacity, and your assets will be considered. However, bankruptcy will help you get rid of the majority of your unsecured debt and assist you in starting afresh.
There are two main types of consumer bankruptcy: Chapter 7 and Chapter 13. There’s also the Chapter 11 subchapter 5, which we will probably see become more prevalent due to the coronavirus. Things that occur after you declare bankruptcy.
The five most prominent things that happen when you declare for bankruptcy are;
1. Bankruptcy Automatic Stay
The moment you fill the bankruptcy petition, you’ll get an automatic stay, and this continues till the end of your bankruptcy case. There are instances where the stay won’t automatically go into effect, some of those instances are when there is a dismissal of your former bankruptcy case, in such a situation, you’ll have to request for a bankruptcy case from a court.
When you get a bankruptcy stay, creditors no longer have the right to seek payments from you. This gives you enough time to re-strategize your debt payment or further file for a Chapter 7 bankruptcy. The Bankruptcy Code gives the creditors authority to collect debt only after notifying a bankruptcy judge.
2. You Must Complete Your Debtor Education Course
Anyone who wants to apply for a bankruptcy discharge is required to register for two bankruptcy courses. The first course is a credit counseling course, which you must complete before declaring bankruptcy, while the other is a debtor education course that you must complete after declaring bankruptcy. The deadline for completing each of the courses varies with the type of bankruptcy plan you’re applying for. The ideal thing is to complete the debtor education course and submit your evidence of completion before meeting the creditors. You can’t receive a bankruptcy discharge certificate is you don’t complete the debtor education course.
3. Attend the First Meeting of Creditors
Attendance at the First Meeting of Creditors, which is also known as 341 meetings is very compulsory for the debtors. The 341 meeting while be scheduled by the bankruptcy court after you file for bankruptcy. The first meeting will be done within weeks of filing for bankruptcy.
The case will be conducted by a bankruptcy trustee that is assigned by the bankruptcy court. In this meeting, the bankruptcy judge won’t be present, it’s only the debtor, the trustee, and creditors, and you’ll be asked some questions about your finances under oath. Creditors are permitted to ask questions from the debtor. However, in most bankruptcy cases, the creditors hardly attend the meeting, except in cases that involve a substantial amount of money.
4. Propose a Chapter 13 Repayment Plan If You Are Doing Chapter 13
You must file a repayment plan on a Chapter 13 bankruptcy after you declared bankruptcy. This Repayment plan should have in detail, how you plan to pay, and the percentage of your monthly income you plan to pay. If the creditor, trustee or court should object to your repayment plan, then you will have to adjust your plan till an agreement is reached. Before doing a Chapter 13 bankruptcy, you may want to explore state specific attributes related to a Chapter 13 bankruptcy. For example, if you’re in Wisconsin, you may search for Chapter 13 Bankruptcy Wisconsin and if you’re in Connecticut, you may search for Chapter 13 Bankruptcy Connecticut.
5. Receive your Bankruptcy Discharge
If you keep to the agreement in the bankruptcy court, the court will issue you your bankruptcy discharge, which exempts any creditor whose loan is covered by the bankruptcy court from requesting any loan payments from you.
You can apply for Chapter 7 and Chapter 13 bankruptcy discharge on most unsecured debt. Some examples of debts that you can use bankruptcy to get rid of are;
- Medical debts
- Lease payment or old rent
- Credit card bills
- Old utility payments
- Old income tax debts, except a few
- Most judgments and personal loans
- Some student loans
You will have to seek the opinion of a bankruptcy lawyer to know which of your debts will be discharged by a bankruptcy court. You may also wish to compare your options before filing for bankruptcy. One bankruptcy type is often more expensive than the other and you have to qualify for a Chapter 7 bankruptcy.