Steps To Take Before Filing for Bankruptcy

If you have been struggling with your finances and have determined bankruptcy is the only solution to starting over and resetting your financial clock, it is important you understand your options. There are two types of bankruptcy filings available that are determined based on the filer’s current circumstance. Below will briefly outline the differences between the two bankruptcy filings available.

Chapter 7 bankruptcy clears most of your debtscurrently owed. However, Chapter 7 also requires you to liquidate much more assets in order to allow you to file for bankruptcy. If you meet the initial requirements for Chapter 7, you will then have to pass a means test. This test was created to exclude individuals that earn enough money to pay down their debts or have high net worth assets that can be liquidated to contribute to paying their debts.

If you do not qualify for a Chapter 7, you may qualify for a Chapter 13 bankruptcy. Chapter 13 does not erase all debts, instead it allows you to pay less money down on your debts. The debtors and government will create a payment plan for you that allows you to pay as much as you can without struggling over the period of three to five years. Once the payment plan has concluded, then your debt will be considered paid.


In order for your petition to be approved for either Chapter 7 or Chapter 13 bankruptcy, you will need to first take a look at your financial records. It is recommended you contact a specialized bankruptcy lawyer. According to Baird Law, it is important to consult with an experienced professional, avoiding the temptation to use online advice or low cost online preparation. Doing so will leave you with the risk of having your case dismissed.

After hiring a bankruptcy lawyer, they will want to obtain all your debt information. They will want to calculate how much you owe for all of your open balance accounts, as well as the estimated insurance costs of that debt over the time that you have had those open balances. Next, your income and monthly payments will be considered; this includes money from your employment, any side money you earn, and all of your living expenses and current obligations.

Next, you will need to participate in credit counseling. This is not optional, all bankruptcy filers must attend credit counseling to qualify for a bankruptcy filing. This counseling with the assistance from your lawyer will determining whether Chapter 7 or 13 filing is best for you, and they will negotiate a payment plan that works for you. Your creditors will review all the information as well as inform you of any and every agreement that you are partaking in to fulfill the bankruptcy. From your discussion, they can either approve or deny your application. If they do accept it, then you will have to have post-bankruptcy credit counseling to ensure that you follow your payment plan.

Your lawyer will facilitate all correspondence and communication and guide you every step of the way. It is important you are well informed and represented through each step of the process.

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