You are on the edge of ruin. New news is bad news, as they say, as you receive more and more threatening phone calls and letters. The grip of financial entrapment is squeezing the life out of your chest.
You need help. Unless you have a rich uncle who’s willing to help you out of debt, or you win the lotto, you find no other option but bankruptcy. Because bankruptcy is considered by many to be a private and secretive affair, chances are, you are not finding any assistance in proceeding.
The first step is to locate an attorney. Find someone that knows what they’re doing. Most lawyers will see bankruptcy as part of their daily business. The procedure is almost the same for everyone. The only trick is to find an attorney that you can somehow afford to pay for the service. Bankruptcy can cost anywhere from $500 to more than $2,000. The irony is, if you’re looking at bankruptcy, you may not have this amount to begin with. Sadly, this fee is almost always non-negotiable. Even attorneys need to get paid.
You will need this money up front. Shop for the cheapest lawyer in your area with a reasonable reputation. The complexity of your filing will affect the cost a little. For most filings, however, attorneys have a flat rate.
You will next need to build a portfolio of assets and liabilities. This will be to prove that you have “significant debt” and no realistic way to repay it. (If you can not prove you are in no way able to repay your creditors/lenders, you will still have to pay back every penny) Bankruptcies are usually handled in Federal Court. This means that the standards do not vary much from state to state.
In your portfolio will be copies of the statements showing all of the debt that you desire to discharge. Note that you do not have to discharge all debt. For example, if you want to keep your house, you can leave your mortgage out of the process. You may have a personal debt to a close friend that you plan to repay. As a rule though, you want to exclude as little as possible so that you come out as debt free as you can.
Bank statements and documents proving income for up to six months are required. Tax forms going back at least a year or two are needed. All bank accounts and holdings are to disclosed. Failure to disclose assets may jeopardize or delay your bankruptcy ruling.
Your attorney will document everything that you need for a successful hearing. He or she will also file all papers and notify you of your court date. You will also be notified by the court. Once the bankruptcy filing is made, your creditors must back off on collection proceedings or risk legal penalties. They have a right to appear at your hearing and protest the bankruptcy, but they rarely will make a difference (or for that matter, bother to appear).
Notices will be placed in local newspapers announcing that the bankruptcy in pending and inviting creditors to appeal. This is the part where bankruptcy can be awkward. Friends, family, co-workers, and neighbors may see your name in print. You will just need to swallow your pride and move forward. Once the bankruptcy is completed, you will be free of the debt and able to rebuild your pride and your life.
The bankruptcy hearing itself is somewhat embarrassing. You are ushered into a room with a gallery filled with other bankruptcy filers. They are allowed to sit and listen in as your personal financial situation is discussed by the court. Sometimes laughter and jeers erupt when people have problems answering some of the tough questions or fail to fully understand what was asked. It can be humiliating. Bankruptcy itself is not a fun thing to go through, and it should be avoided. However, if you decide it is more important to escape your financial turmoil than to keep your reputation, you have no other option.
The hearing typically lasts about fifteen minutes or less. Assuming you are allowed to declare, you will be informed that you will receive your debt discharge letter in about eight to ten weeks. For most bankruptcy filers, once you leave the courthouse, your part is over. When you receive the letter, your financial picture can begin to brighten. During this process, you will have to take or listen to training on how to manage debt and financial matters.
Remember that you can only declare bankruptcy once every seven year without having to face legal problems. The legal possibilities give creditors a reasonable expectation of full repayment of any new debt. After bankruptcy, your credit will be incredibly poor, but creditors will also understand that since you can only declare once every seven years that you have a relatively good shot at payment.