Filing for personal bankruptcy is a serious move that takes a long time of careful contemplation. As debtors gradually fall behind in payments, the pressure from creditors to get their money back can finally lead to the decision to file for bankruptcy. Bankruptcy provides a means to rehabilitate finances while preventing aggressive creditors from repossessing property.

When you file for bankruptcy, you must decide the following:

• Chapter 7 or 13
• Represent yourself or hire a lawyer

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Chapter 7 Bankruptcy provides for the liquidation of a debtor’s assets for the repayment of debt owed to creditors. Chapter 13 Bankruptcy requires a repayment plan for paying off debt over 3 to 5 years.

You don’t need to have a lawyer to file bankruptcy. A bankruptcy lawyer understands the law; he can more easily guide you through the process, relieving stress.

Once you have prepared yourself, filing for bankruptcy is a fairly straightforward process – collect required legal documents, pay the fees, and follow the process steps. Gather your federal income tax returns and other financial records together. The court filing fee is relatively affordable.

Chapter 7 versus 13 Process

The complexity of the personal bankruptcy filing process depends on your finances. If you have few assets and creditors, then the process is very easy.

Here is the basic Chapter 7 process:

1. Complete pre-filing credit counseling
2. File petition and pay court fee
3. Fill out paperwork
4. Send copies of federal income tax returns
5. Court sends notices to creditors and debtor
6. “341 Meeting”
7. Within 10 days of 341 Meeting, the Trustee approves or rejects the “Means Test”
8. Secured creditor meeting
9. Creditors can object to exemptions for 30 days after the 341 Meeting
10. Creditors have 60 days after the 341 Meeting to discharge filing
11. Creditors have 120 days after the 341 Meeting to provide “Proof of Claim”
12. Debtor must complete financial management course
13. No-asset case closes
14. Asset case requires trustee to liquidate property and distribute to creditors.

The Chapter 13 process is more complicated:

1. Complete pre-filing credit counseling
2. File petition and pay court fee
3. Fill out paperwork
4. Send copies of recent federal income tax returns
5. Court sends notices to creditors and debtor
6. Formulate payment plan
7. Send copies of recent federal income tax returns
8. “341 Meeting”
9. Creditors can object to exemptions for 30 days after the 341 Meeting
10. Proof of insurance for holders of purchase money security interest
11. Confirmation hearing
12. Valuation hearing
13. Creditors have 120 days after the 341 Meeting to provide “Proof of Claim”
14. Annual reports of income and expenses
15. Debtor must complete financial management course
16. Complete payment schedule
17. Discharge hearing eliminates remaining debt balances.

What do these filing terms mean?

Here are the definitions for common bankruptcy filing terms listed above:

“341 Meeting” – Creditors and debtors go before the Trustee examining financial records
“Confirmation Hearing” – Approval or rejection of repayment plan
“Valuation Hearing” – Creditors can object to unfair treatment
“Proof of Claim” – Creditor must prove that he has a legal right to reimbursement.

There will be a fee for the pre-filing credit and post-filing budget counseling.

There are many forms associated with filing bankruptcy. Here is a listing of some:

- Current Monthly Income
- Disposable Income
- Credit Counseling Certificate
- Creditors Holding Secured Claims
- Means Test

An example of what is included in one of these forms is as follows for the “Creditors Holding Secured Claims:”

- Creditor’s name
- Address
- Account number
- Date
- Nature of the lien
- Value.

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