Filing for bankruptcy indicates your financial life has run into serious problems, and it should only be used in the worst-case scenarios. You can only file for a single form of bankruptcy once every six years. Depending on the kinds of debts you need to have discharged, it could take anywhere from six to 12 years for the effects to wear off from your financial history. However, bankruptcy can also ease some of the pressure on your finances and help you to start fresh. Here's what you need to know to get started in filing for bankruptcy.

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Meet with a Lawyer

Even though money is tight, one of your first steps needs to be to meet with a lawyer. Bankruptcy lawyers understand, and some offer free consultation services. You need to meet with a lawyer to determine whether you should file for bankruptcy and to discuss what strategies you should use. A good bankruptcy lawyer knows how to file for bankruptcy along with potential strategies to help protect your assets. While the lawyer will not tell you everything in this single session, he or she can help you tailor your bankruptcy plan to avoid common pitfalls and to maximize your saved possessions.

Set Up Consultations with an Accredited Debt Management or Credit Counseling

The federal government now requires that individuals who apply for bankruptcy receive credit counseling from an accredited or approved organization. This is in addition to anything the state may require. The course itself must be completed within 180 days before filing so that you can make sure that you only declare bankruptcy as a last resort. The Federal Trade Commission provides a full list of approved organizations and counselors. These people and groups will provide you with a Debtor Education Course certification when you are done.

Gather All of Your Financial Information

One of the most time-consuming parts of filing for bankruptcy is gathering your financial information. If you can bring together seven years’ worth of financial information including tax records and the like, you will have everything you need. Otherwise, you just need the past two years of information. Remember to include your current budget as well as a breakdown of what you will need to live on. Precision is essential here. Overestimation can get you in trouble if the court believes you are trying to hide assets, but underestimation can leave you with too little to provide for yourself and your family.

Decide on the Form of Bankruptcy You Want to Declare

The two primary forms of bankruptcy are Chapter 7 and Chapter 13 bankruptcy. Chapter 7 bankruptcies involve taking all assets except for certain exempted items and selling them to satisfy the payment of debts. All outstanding debts with the exception of student loans, government debts, and legal obligations are then discharged. Chapter 13 bankruptcy allows for a restructuring so that debts can be paid off within three to five years with any remaining debts being discharged at the end of that period. Only a portion of the assets must be sold, and most of the time, the focus is on reorganization rather than on selling. Declaring Chapter 13 is best for individuals who are just unable to meet the current debt load but still have some assets they want to keep or a steady job that can provide a reasonable income for that period.

File a Bankruptcy Petition with the Court

After you have decided on the form of bankruptcy, you need to get a copy of the Debtor Education Course, an appropriate chapter bankruptcy petition, and the necessary fees for your state filing. Once you file the bankruptcy petition in the clerk's office, an automatic stay of protection goes into place. This keeps creditors from contacting you and attempting foreclosure or other debt-collection practices. The court will generally contact you with a series of meeting requirements, a trustee to assist you with the property management and case oversight, and other potential course requirements. Most Chapter 7 bankruptcy proceedings are completed within six weeks. Chapter 13 can take significantly longer, but the automatic stay provides protection throughout the entire period.

Get started Ask a Lawyer a Question You'll hear back in one business day.

Get started Ask a Lawyer a Question You'll hear back in one business day.