If your debts have been piling up, you've probably been thinking about filing for bankruptcy for a while now. The odds are good that you're a little bit terrified, however, of filing for bankruptcy. Chapter 7 bankruptcy -- which is often called "total" bankruptcy -- is shrouded in a lot of half truths and rumors that make people far more afraid of the process than they should be.
Here's what you can actually expect:
1. You'll find an experienced bankruptcy attorney to help you.
You absolutely don't want to try to handle the bankruptcy process alone. The rules regarding each step of the process can be difficult to follow, and this is no time to try your luck. A mistake now could haunt you for years to come. Find a bankruptcy attorney that you feel comfortable working with and discuss your situation. Make sure that a Chapter 7 bankruptcy is actually the best option for you (as opposed to another type of bankruptcy or some form of credit negotiation).
2. You'll be required to go through credit counseling.
Even though the chances are very high that there's nothing you could have done to prevent your bankruptcy (especially if you got there through a medical crisis or a sudden loss of your job), credit counseling is required. Don't take it personally -- in fact, you can probably pick up some useful tips about post-bankruptcy finances while you're there and ease your fears even further, so get this out of the way as soon as possible.
3. You'll be required to file all the paperwork.
There's a lot of paperwork that has to be filed in your petition for relief -- and your attorney can help. However, you'll need to gather up things like your credit card statements, information on pending lawsuits from creditors, collection notices, utility bills, taxes, mortgage information, vehicle records, bank statements, and income statements.
4. The automatic stay goes into effect.
Once you've filed the paperwork, all collection efforts against you have to cease immediately. If a collection agent calls, give them your bankruptcy attorney's contact information and your case number and let your attorney handle it.
5. The trustee will look over your case and schedule the meeting of creditors.
Once the trustee has your case file, he or she will begin to manage the process. Trustees are, quite frequently, lawyers themselves -- and they're human beings who understand that people can end up in debt through many different situations. Don't be intimidated.
The meeting of creditors gives your debt holders a chance to make their claim -- but the trustee and your attorney will be there to shield you and make sure that you aren't harassed or treated unfairly, so don't panic. (In many cases, nobody even shows up to these meetings for a Chapter 7, because the debtor's income and assets are too low to fight over.)
6. Everything will be reviewed and wrapped up.
Finally, once the trustee has determined that you're eligible for bankruptcy protection and decided whether you have any assets worth selling, the final decisions will be made on your case. From start to finish, it takes about six months for your bankruptcy to close and your debts to be forgiven.
Don't be afraid to exercise your legal right to bankruptcy protection. Your Chapter 7 bankruptcy lawyer can guide you every step of the way.