How Does Bankruptcy Work?

Bankruptcy is one of those things people are afraid of, but they really don’t know why. Once you learn the facts about bankruptcy and how it works, you’ll want to know more.

Bankruptcy is a legal process that is administered through the court. While people can technically file bankruptcy themselves, it’s not a smart idea. Mistakes happen and a mistake in bankruptcy can be costly.

Instead, people generally seek the advice and assistance of a local bankruptcy attorney to file bankruptcy. The bankruptcy attorney will be familiar with bankruptcy and the local variations in your area. If you follow this link I can help you to find a local bankruptcy attorney who can give you a free consultation.

So How Does Bankruptcy Work?

Once you meet with the bankruptcy lawyer you’ll have a much better idea if bankruptcy is right for you. You and your attorney will evaluate if you will file a chapter 7 bankruptcy or a chapter 13 bankruptcy.

In either case you will need to complete a pre-bankruptcy credit counseling session, otherwise known as a total waste of time. It’s mandatory however. You will also gather up information about your income and debts and give it to your bankruptcy attorney. They will probably ask for copies of your tax returns as well.

The bankruptcy attorney will complete the paperwork, called the petition, and that will be filed with the court. Once the paperwork is filed it will stop any lawsuits and wage garnishments. Once your creditors and debt collectors are notified it will stop all of that activity as well.

In the case of a chapter 7 bankruptcy you will have to meet with the bankruptcy trustee once and shortly thereafter you will receive a notice that your bankruptcy debt has been eliminated.

If you file a chapter 13 bankruptcy to protect your house or some other asset, the trustee meeting will be a confirmation of the monthly payment plan your attorney drew up. You will then make those monthly payment to the bankruptcy trustee each month.

If you want to learn more about bankruptcy in the context of getting out of debt I’d suggest you read How to Get Out of Debt.

And you may be surprised to learn that in a nutshell, that’s the entire bankruptcy process and how bankruptcy works.

Following the discharge of your debt you can then focus on quickly rebuilding your credit. Use my free guide to show you how.

Bankruptcy gives you a legal fresh start and a second chance to get out from under overwhelming debt so you can move forward with your life.

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Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
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