How to file for Bankruptcy
Chapter 7 bankruptcy is not impossible under the new law
There is widespread belief that filing for bankruptcy under the new law is impossible. The author dispels this belief and shows you the steps necessary to file.
Rumors abound that it is now virtually impossible to file for bankruptcy. Those rumors are false. Many people have gotten in over their heads financially for a number of reasons, including medical bills from a catastrophic injury, the loss of employment or the constant barrage of credit card offers with much fine print. Bankruptcy is still available to those individuals and families that are in need of a “fresh start.” There are new and important steps along the way to discharging credit card and other debt, but no one should feel intimidated by the process.
The following steps are now involved in the bankruptcy process:
I. Obtaining the bankruptcy forms.
II. Determining if you pass the Means Test.
III. Credit Counseling.
IV. Completing the forms.
V. Filing the forms.
VI. Providing additional documents.
VII. Attending your bankruptcy hearing
VIII. Financial Management Course.
IX. Receiving your Discharge.
Steps I – IV will be discussed in this article and steps V-IX in a subsequent article.
I. Obtaining the bankruptcy forms.
There are a number of ways to obtain the necessary bankruptcy forms for your bankruptcy. One method is to purchase a commercial program such as Best Case Software. Software programs can cost between $300 - $800. Another method is to purchase one time software which typically costs between $40-$70. Some examples include Guaranteed Bankruptcy or Standard Bankruptcy. You may also obtain the forms for free from the U.S. Bankruptcy Court in your state or the U.S. Bankruptcy site. Many states maintain a website for the court and the forms may be downloaded. For example, the U.S. Bankruptcy Court, for the district of Maine has free forms available: Chapter 7 Bankruptcy Forms.
II. Determining if you pass the Means Test.
Under the new bankruptcy law that went into effect on October 17, 2005, bankruptcy debtors are required to prepare and submit a Means Test. The test basically looks at a debtor’s average income from all sources for the 6 months prior to filing for bankruptcy and compares it to the median income in the debtor’s state. For example, the median annual income for two person family wage-earners in Maine is $45,750. If your income is below that figure then you can file for Chapter 7 bankruptcy. If it is not you still may be able to file, however, you will need to complete the balance of the Means Test form. If you have remaining income after allowed living expenses, then that amount must be multiplied by 60. If the figure if $10,000 or more then you will have to file a Chapter 13 bankruptcy which requires a repayment plan. You can check the amount for your state by going to the U.S. Trustee’s website.
III. Credit Counseling.
With limited exceptions, all debtors who file for bankruptcy must receive a briefing that outlines the available opportunities for credit counseling and provides assistance in performing a budget analysis. The briefing can be given up to the day prior to filing, but must be within 180 days before the bankruptcy filing. It may be provided individually or in a group (including briefings conducted by telephone or on the Internet). Further the briefing must be provided by a nonprofit budget and credit counseling agency approved by the United States trustee or bankruptcy administrator. The clerk of the bankruptcy court and the U.S. Trustee’s office maintains a list of approved credit counselors.
IV. Filing the forms.
Once a debtor has completed the means test form, the petition, schedules and other forms required, and completed the credit counseling (the debtor will receive a certificate of completion), the forms may be filed with the Court. The filing fee for a Chapter 7 bankruptcy case is $299.00. If a debtor cannot afford to pay the entire fee all at once, the Court allows for installment payments.
Bankruptcy remains available to individuals in need of a fresh start, even individuals that cannot afford an attorney. Although the process can be intricate, it is not impossible. Further tips and explanation of the process after filing will be discussed in the next article.
Richard Cleary is a Chapter 7 Bankruptcy Trustee
