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Process Of Bankruptcy

If you’ve evaluated all the pros and cons of bankruptcy and decided to move forwards, you are headed towards a long and complex process. While Chapter 7 and Chapter 13 bankruptcy processes are different, below we discuss some general steps to give you an idea of the basic process. 

General Bankruptcy Steps

Here are some general guidelines as to what to do next after deciding to file for bankruptcy:

  1. Consult with a skilled bankruptcy attorney: You need to find an attorney who has extensive experience with bankruptcy law, such as BCN Law Firm. You will need a firm that has specific experience handling bankruptcy and has a proven track record of successfully dealing with situations similar to yours.
  2. Bankruptcy counseling: When filing bankruptcy you are required to attend two credit counseling sessions with a counseling agency approved by the U.S. justice department. The first round is pre-filing counseling, where the counselor discusses your budget and the pros and cons of filing for bankruptcy, along with some potential alternatives. The second type of counseling will be discussed later in this article. 
  3. Filing for bankruptcy with the court: You file with the court after the pre-filing counseling session. The bankruptcy will now appear on your credit report, and creditors are required to stop contacting you and trying to collect on your debt. Creditors are prohibited from contacting you because bankruptcy results in an “automatic stay,” preventing all legal activities from happening right after bankruptcy is filed. 
  4. Liquidation or repayment: Depending on whether you decide to file a Chapter 7 or Chapter 13 bankruptcy, you may need to liquidate all assets of value to repay existing creditors or a portion of your debt. In a Chapter 7 filing where there are no assets of significant value- known as a “No Asset Case” – the courts don’t sell your property. If you have secured debts to keep, such as a car or a house, you need to keep making payments on those debts moving forward and inform your attorney regarding any secured property you want to retain after the bankruptcy is complete.
  5. Debtor Education Course: This is the second counseling session referred to previously, and must be completed before your debts are discharged. The debtor education requirement is supposed to educate you on making smart financial choices in order to avoid seeking future bankruptcy relief. Some things you typically learn about on a debtor education course include:
    1. Money management
    2. Budget preparation
    3. Using credit effectively and wisely
    4. Dealing with an unexpected financial crisis
  6. Debt discharge: After completing all the above steps, eligible debts are discharged. Bankruptcy erases old debts and eliminates your obligation to pay creditors in the bankruptcy, so you may get some relief from the weight of your debt. However, remember that you now have to start over and rebuild your credit, which can be a long journey. 

Contact Us Today

Filing for bankruptcy is not a magical solution to get rid of all your financial problems, and it can stay on your credit report for up to a decade and significantly impact your credit score. If you are in need of an attorney with a proven track record of handling bankruptcy cases, call BCN Law Firm today!