Understanding The Bankruptcy Process

Bankruptcy is an opportunity to take back some control of your financial situation. It is wise to try to make the most of it, but how can you do so? A bankruptcy law attorney will tell you to approach the situation with these four things in mind.

Patience Before Filing

When someone decides to file bankruptcy, they may just want the whole mess to be over as soon as possible. However, the biggest mistake you can make is filing so quickly that you overlook something important. You need to be sure to name all of your creditors and list all of your dischargeable debts.

The court usually moves fast on bankruptcy cases once they're in the system. If you forget something, it may be nearly impossible to revise the filing once the process starts rolling. Pump the brakes for a few weeks so you and your bankruptcy law attorney can nail everything down.

Bankruptcy Type

Try to be as sure as possible that you're filing the correct type of bankruptcy. This can be a little tricky for edge cases so it's smart to consult with a lawyer. There are two types of bankruptcies. In liquidation, a court-appointed trustee may sell your disposable assets to satisfy at least part of what's owed to creditors. In restructuring, the court may allow you to pay a smaller amount based on a plan without surrendering assets.

Notably, the qualifications for each type are different. If the court thinks you can afford to pay on a plan, it may reject a liquidation request. When that happens, you have to restart the process, including new filing costs.

Exemptions

If you're filing for Chapter 7 liquidation, exemptions can make a difference. Exemptions exist so people can lead sane financial lives after bankruptcy. For example, you can seek an exemption for your vehicle so you can have something to get to and from work and deal with everyday needs like going to the store.

Some states also allow extensions that go beyond the practical. A state may allow exemptions up to a certain threshold. Never assume this will be the case in your state, though. Ask a bankruptcy law attorney what the rules are in your state.

Supporting Documents

The court needs to know what your financial situation is. In some cases, this may be as simple as proving your income is below a certain threshold. However, folks who don't meet those criteria may need to show they're carrying untenable debt loads. Make copies of basic financial documents like your last two years' tax filings and the last few months' utility bills.

Contact a bankruptcy law attorney for more information.