How To File Bankruptcy

How to File Bankruptcy

Before a person who thinks of filing bankruptcy goes ahead on this action, he must weigh things very seriously first, no matter how desperate he is, because filing a bankruptcy is not just another normal thing. It has a lot of consequences and most of them might not be apparent at the moment.

Bankruptcy is a statutory procedure by which a debtor obtains financial relief and undergoes a judicially supervised reorganizations or liquidation of the debtor's assets for the benefit of creditors. It allows individuals or businesses who in debt to others for more money than they're able to pay, to either work out a plan to repay the money over time or completely eliminate most of the bills.

How to file bankruptcy is could be a complicate process, but with proper treatment of the issue and scenario, the how to file a bankruptcy process could be made easier.

The following are steps on how to file bankruptcy: gathering paperwork, filing bankruptcy, automatic stay, bankruptcy trustee, meeting of creditors and plan confirmation.

Gathering paperwork is the first and most essential step to begin the process of how to file a bankruptcy. One must itemize his current income sources; major financial transactions for two years; monthly living expenses; debts, both secured and unsecured and property which includes not only real states but all assets and possessions. One should also collect his tax returns for the last two years, deeds to any real estate owned, car titles and documents for any loan.

Once the necessary documents are gathered, one should then determine which property is exempt from seizure based on the exemptions provided by his State. This is the point where in bankruptcy may be filed. In filing bankruptcy either the person involved or his counsel will need to file a two- page petition and several other forms at a bankruptcy district court where he resides. These forms are referred to as the schedules and ask one to describe his or her current financial status and recent financial transactions. If the creditors or the judge feel or find out that you have not been thorough in your account of your financial status, it could jeopardize the outcome of the petition.

When the gathered paperwork has been filed with the bankruptcy court, the next step on how to file bankruptcy is an automatic stay immediately goes into effect. This provision prevents creditor from making direct contact to the person filing for bankruptcy, or staking a claim on any of the property of the person involved. In addition, this will stop any foreclosure proceedings.

Upon filing of bankruptcy, the court will assume legal control of the debts and property not covered by exemptions. A trustee will be appointed by court to see that creditors are paid as much as possible. The trustee, furthermore, will systematically review the paperwork, particularly the assets. The trustee could also challenge any element of the bankruptcy case.

After a month of filing, the trustee will call for a first meeting of creditors, this is also referred as 341 Meeting of the Creditors. Objections are typically resolved by negotiation between the debtor or the debtor's counsel and the creditor. If a compromise can not be reached, a judge will intervene.

Finally if the plan is confirmed, the balance on the dischargeable debts if there is any, will be eliminated at the end of the term.

These are the steps on how to file bankruptcy. It must be noted that the help of a counsel would be needed.