How to File Bankruptcy

Written by jessica Alba

Like millions of other people, tough economic times may be making it impossible to proper support yourself and your family. With unemployment almost in the double digits, hours being cut back, even if you are lucky enough to still have a job, and out of control credit card debt, it is no wonder that more and more individuals are contemplating bankruptcy as the only option to a fresh start. However, that prospect seems totally daunting. But, if you know how to file bankruptcy, it may be easier to determine whether that is what you need to do, in order to safeguard the basic necessities of life.

It is up to You

If you are seriously considering chapter 7 or chapter 13 bankruptcy, the first step is up to you. You have some homework to do. You need to take stock of your assets and liabilities, to determine if you even qualify for debt relief. Remember the fun of preparing your taxes? Well, grab a cup of coffee, send the kids to Grandma, and settle in for a night of gathering all of your financial information.
Step One: Go online and request your credit report from all 3 of the companies that keep track of credit scores. Although they all should have the same information, it is not necessarily the case. So, you need to get a copy of all 3, and see just where you stand with your creditors.

Step Two: Find out the true value of all of your assets. It can be quite a task, but it will be worth the effort, when it comes time to actually file the papers with the court. For example, your car is probably not even worth the amount you still owe on the loan. The biggest one time chunk of depreciation happens as soon as you sign on the dotted line and drive that vehicle off of the lot.

But, you can go to www.kbb.com and find out what your car is really worth. You are searching for the Kelly blue book value. The program will ask the make and year of your car, in addition to the various amenities that may increase the value.

If you have a house, you will also need to have the true value of the property assessed. If you live in a community where the economy is really depressed, the resale value of your home will likely be less than what you actually owe. One the other hand, it may have appreciated in value.

Step Three: Gather all of those bills. Sit down and figure out the minimum payments on any credit cards. If you owe medical bills, calculate the amount owed, and any minimum payment agreements the providers will accept, without sending you to a credit bureau. For instance, many doctors would rather get $25 a month than send you to a collection agency. They want to eventually get the whole amount, rather than have to pay someone to get the money out of you.

Step Four: You are going to have to provide documentation of your current income. If you are behind in filing income tax, have that all ready to go, but do not actually file the paper work with the IRS. Right now, it is simply for the process of discovering your true net worth, and the ability/inability to pay the debt you now owe.

Step Five: After you have done your homework, you need to seek the professional services of a bankruptcy lawyer. Although it will cost money, it will save you a lot of cash in the end. You need someone who knows all the legalities of filing bankruptcy, and can help you determine what type of bankruptcy you need to file.

Do you need to file chapter 7 bankruptcy and have the majority of your debts totally forgiven; or, would it be preferable to file chapter 13, so you have the chance to restructure your financial situation and still be able to keep your assets? In some cases, you payments will be restructure based on the value of your property-the amount that creditors would likely receive if they repossessed your assets and tried to resell them as used-and you can still live in your home and have transportation to work.

In short, filing bankruptcy is not necessarily a simple matter. But, before foreclosure proceedings are underway, or someone comes and tows your car away in the middle of the night, you will want to take stock of your financial plight and seek the advice of a bankruptcy lawyer. Even if you have done everything to avoid filing for bankruptcy, it may be the only way to get that fresh start you need and still provide the basic necessities of life for your family. Sometimes, bankruptcy is the light at the end of the financial tunnel that you have been look for.