When it comes to filing for Chapter 7 bankruptcy, you need to prepare for the process that will occur. There are a few key tasks that you should accomplish to ensure that the bankruptcy is handled properly. Before entering into the bankruptcy process, be sure you are ready by evaluating every item on this Chapter 7 bankruptcy checklist.
Before filing bankruptcy, examine your alternatives. Perhaps you can negotiate with your creditors for a lower interest rate or a payoff of your total debt for a reduced percentage of the outstanding balance. If this isn’t an option, considering selling property to pay off the debt.
Not everyone is eligible for Chapter 7 bankruptcy. Before deciding on whether or not to file Chapter 7 bankruptcy you should determine whether or not you are even eligible for this form of bankruptcy and then proceed to the other items on the checklist.
Assess Your Property
If you file Chapter 7 bankruptcy, your nonexempt assets will be liquidated. Take inventory of your assets and determine if you can deal with these assets being liquidated to complete the bankruptcy process. If you feel you cannot live without these items, you may want to look into alternative solutions other than bankruptcy or look into redeeming or reaffirming the debt associated with the property.
Decide to Reaffirm, Redeem, or Surrender Debt
When you enter into Chapter 7 bankruptcy and there is property you do not wish to surrender, you may be able to redeem the property. This means that you pay the debtor the current value of the property in order to keep it. If you are entering into Chapter 7 bankruptcy, chances are that you do not have the money to redeem your property, in which case you will need to seek out a redemption loan or a gift or loan from your family or friends.
If redemption is not possible, you may want to reaffirm the debt, which means the debt attached to the property remains in effect. You will still have the pay off the debt after the bankruptcy is completed and if you default, the creditor has recourse to collect the debt from you.
If you don’t wish to redeem nor reaffirm the property, then you will surrender the debt, which means you surrender the items associated with the debt during the bankruptcy process.
Attend Credit Counseling
As a part of bankruptcy you will be required to attend credit counseling. It is important to pay attention during the counseling to understand what went wrong and why you need to file for bankruptcy to begin with. The counseling can also help you understand how to better handle your finances in the future.
Gather Important Documents and File Paperwork
Once you have attended credit counseling, you will need to gather important documents, such as titles to any vehicles you own, deeds to property, bank statements, and other related documents. You will then need to file the proper paperwork to begin the bankruptcy process.
Attend a Creditors’ Meeting
After you have filed for bankruptcy you will need to attend a creditors’ meeting. This meeting is usually set at least 21 days but no more than 40 days after the day you file your bankruptcy case. A Chapter 7 trustee will oversee this meeting. His or her main task is to sell nonexempt property to pay back your general unsecured creditors. This individual also looks for bankruptcy fraud and makes sure your paperwork is accurate. He or she will review your tax returns, your pay stubs, a brief history of major financial transactions, your debt, and your expenses. This is usually done at the creditor meeting. At this meeting your creditors may also appear and ask questions related to the bankruptcy and your finances.
Attend Personal Financial Management Counseling
Before your bankruptcy can be discharged, you will be required to attend personal financial management counseling, also known as pre-discharge counseling. The course must be taken from an agency that has been approved by the Office of the U.S. Trustee. This course will last a minimum of two hours. Courses can be taken online, through the mail, or in person. After you take the course, you will be required to file the Official Form 23 with the court, which certifies that you have taken the course and file a certificate of completion.
Receive Bankruptcy Discharge Notice
After you have completed all of the above steps, you will receive your bankruptcy discharge notice. This notice indicates that your bankruptcy is complete and final. Keep copies of this discharge notice in case creditors try to collect on a debt that was included in the bankruptcy.