How to Plan for Bankruptcy

Bankruptcy is a complex legal process and requires detailed planning. Even a small mistake can be costly. Planning is very important when you are filing for bankruptcy.

Choosing the Right Chapter

Individual debtors generally file for bankruptcy under Chapter 7 or Chapter 13. Chapter 7 is a liquidation process wherein the debtor’s assets are liquidated by the bankruptcy trustee to pay off the creditors. In Chapter 13 the debtor makes payments according to the payment plan approved by the creditors. In Chapter 13 the debtors retain the possession of his or her assets. You should seek legal bankruptcy advice from an experienced bankruptcy attorney to determine which of the two chapters is better suited for you.

Means Tests

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA) introduced a means tests as a criteria for Chapter 7 filing. Debtors who do not pass the means tests may be eligible to file under Chapter 13. If you are considering bankruptcy, seek legal bankruptcy advice from an experienced bankruptcy attorney. The law now requires people planning to file for bankruptcy undergo a pre-bankruptcy credit counseling from a government-approved organization within 180 days before they file.

Automatic Stay

When you file for bankruptcy under Chapter 7 or Chapter 13, an automatic stay comes into operation by law. When the stay is in operation, creditors cannot contact you or initiate or continue collection activity. If you are facing foreclosure, you can use bankruptcy to stop foreclosure. The automatic stay stops foreclosure during the operation of the stay. You can to permanently stop a foreclosure with Chapter 13 bankruptcy.  If you make payments according to the Chapter 13 plan and include your mortgage debt in the plan, you should be able to permanently stop foreclosure. A Chapter 7 bankruptcy will temporarily delay foreclosure while the U.S. Bankruptcy Court works out the details. It can buy you 45 to 75 days.

Bankruptcy Fees

There is a fee for every bankruptcy petition as follows:

You can use your tax return for bankruptcy fees.

Getting legal help

An experienced bankruptcy attorney can assist you plan for bankruptcy and advise you how to use bankruptcy to stop foreclosure and use tax returns for bankruptcy fees without hurting your chances for a successful bankruptcy discharge.