Have you ever seen the episode of NBC’s The Office where regional manager Michael Scott thinks all he needs to do to get out of his financial troubles is literally declare bankruptcy? Michael walks into the office and shouts “I declare bankruptcy!”
In reality, filing for bankruptcy involves many more steps than that.
The process starts by meeting with an experienced bankruptcy lawyer who can help you decide if bankruptcy is the right choice for you, and if so, which type of bankruptcy you should file. Chapter 7 and Chapter 13 are the two most common types of bankruptcy for personal filers.
During a Chapter 7 bankruptcy, your non-exempt assets are liquidated in order to pay off as many of your creditors as possible, though this usually doesn’t include assets such as your home, vehicle, clothing and personal items. The rest of your debts — omitting certain un-dischargeable debts — are then wiped clean.
A trustee is appointed by the court to oversee the Chapter 7 bankruptcy process, and the filer has to be ready to answer questions pertaining to his or her debts and assets. There is a court fee that applies to filing for Chapter 7 bankruptcy, as well as attorney fees that apply.
After the Chapter 7 bankruptcy is filed in court, the process usually takes between four to six months to complete.
On the other hand, the Chapter 13 bankruptcy process involves coming up with a manageable repayment plan to use to repay some of your creditors over three to five years, while your remaining debt is forgiven. This is a popular option for individuals who don’t qualify for Chapter 7 bankruptcy.
People who file for Chapter 7 or Chapter 13 bankruptcy are also required to complete pre- and post-bankruptcy credit counseling before the process can be finalized.
An experienced bankruptcy lawyer can tell you more about both bankruptcy processes and which, if either, you may benefit from.
