Are you perplexed about how to file bankruptcy? If so, you aren’t alone. The biggest source of bankruptcy confusion stems from new bankruptcy laws enacted by Congress in 2005. Known as the Bankruptcy Abuse Prevention and Consumer Protection Act, BAPCPA placed multiple restrictions on debtors and require all petitioners to obtain credit counseling.

Comprehending the process of how to file bankruptcy generally requires help from a bankruptcy lawyer. While there is no legal requirement for petitioners to obtain legal representation, few people can get through the process alone. BAPCPA requirements could cause debtors who file without legal assistance to have their bankruptcy petition dismissed or rejected.

Six bankruptcy chapters exist and include Chapter 7, 9, 11, 12, 13 and 15. Individuals filing personal bankruptcy must file for Chapter 7 or 13. The remaining chapters are used for businesses and corporations, as well as commercial fishermen and farmers.

In previous years, debtors sought financial relief under Chapter 7. Often referred to as liquidation bankruptcy, debtors must sell valuable assets to repay outstanding debts. Any amounts remaining are written off; giving debtors a clean financial slate. Some debts cannot be discharged through Chapter 7 including child support, pending lawsuits, government funded or guaranteed student loans, and delinquent state and federal taxes.

Under BAPCPA, the majority of debtors are required to file Chapter 13. Also known as reorganization bankruptcy, Chapter 13 requires debtors to repay a portion of their debts. In order to determine the amount of debt to be paid, debtors must undergo the ‘means’ test. This financial tool compares petitioners’ income to their states’ median income level. When income is equal to or greater than median income, debtors must file Chapter 13. If income is less than median income, debtors might be allowed to file Chapter 7.

Debtors who obtain authorization to file Chapter 13 must submit a repayment plan to the bankruptcy court for approval. Most Chapter 13 payment plans extend for two to five years. During the repayment phase debtors must contribute a large portion of disposable income toward repayment of debt. Additionally, debtors are prohibited from incurring new debts without court approval.

Chapter 13 payments often place a heavy burden on debtors which can cause them to fail out of bankruptcy. Failing out of bankruptcy will result in loss of court protection and allows creditors to petition to court to seek dismissal. When creditors petition the court for dismissal, a bankruptcy judge reviews the case to determine if debtors are eligible for Chapter 7. If the judge dismisses the bankruptcy petition, creditors can commence with collection actions, including home foreclosure.

The bankruptcy process requires debtors to submit their petition to the court. Afterwards, a 321 creditor meeting is arranged to allow creditors and debtors to discuss payment arrangements. Creditors are allowed to question debtors regarding the circumstances that caused them to file bankruptcy, as well as develop a repayment plan.

Creditors are not required to attend the creditor meeting. However, in order to have their claims included in the Chapter 13 payment plan, creditors must submit a claim through the bankruptcy court within 30 days of the meeting.

The final step of the bankruptcy process requires debtors to appear in front of the judge. The judge will review the proposed Chapter 13 payment plan to determine if it meets BAPCPA requirements. Debtors must present a credit counseling certificate to verify they have met counseling requirements. The judge can either approve the Chapter 13 payment plan; allow debtors to discharge debts under Chapter 7; or dismiss the bankruptcy petition.

Individuals in need of bankruptcy protection should explore information provided through the Department of Justice U.S. Trustee Program website at Justice.gov. Debtors can locate a list of approved credit counseling and debt education agencies, along with bankruptcy information, forms and resources.

Author Bio: Simon Volkov is a private investor who offers solutions to people facing hardships. He specializes in foreclosures, probate, promissory notes and helps people understand how to file bankruptcy. Learn more by visiting www.simonvolkov.comtoday.

Category: Finances
Keywords: how to file bankruptcy, chapter 7, chapter 13, personal bankruptcy, chapter 13 payment plan, bapcpa