There are two options for filing bankruptcy as a consumer, chapter 7 and chapter 13 bankruptcy. Chapter 7 is often called liquidation as all of your property that is not exempt is sold in order to pay off your debts. Exempt property is that property that the government allows you to keep in order to continue living a normal life, like a auto, clothes, furniture, etc. States are allowed to set different bankruptcy exemptions, as well as Federal exemptions that can be used in some states.
In order to be able to file a ch 7 bankruptcy petition, have to be an individual, not a business or farm, you must take a credit counseling course from an approved agency inside the 180 days before filing for ch 7 bankruptcy relief, and qualify the means test which is filled out with your petition.
In a ch 7 petition, you will have to file schedules that list your debts, assets, earnings and living expenses. Copies of tax returns, pay stubs and credit counseling certificate will also have to be filed. Married bankruptcy filers must provide the spouses information even if they are not filing bankruptcy together so the court can determine the households ability to pay the debts.
When filling out your petition, you will have the option to continue paying and holding onto your property if you are able to, such as your domicile or auto, by making a reaffirmation agreement with the creditor. By reaffirming the debt you are recognizing that you intend to make payments. If the trustee grants your reaffirmation agreement, the creditor may be able to repossess the property if you do not pay.
When you file your ch 7 bankruptcy document you will have to give a filing fee of $299. This cost can be paid in installments, up to 4 no later than 120 days after filing. Once the petition is filed, the bankruptcy stay is in effect, creditors cannot call, collect or file lawsuits. Each of your creditors will be advised that you have filed bankruptcy and yielded a chance to respond. Within 20-40 days a 341 meeting will be called. During this meeting, the trustee and your creditors may ask questions about your petition. Within 10 days of the meeting the trustee will rule on whether the case should be presumed as abusive under the means test. If your case is presumed to be abusive you will be given a chance to refile under chapter 13.
Your assets that are not exempt are then liquidated and profits go to creditors. Once liquidation is completed, you are granted a discharge wiping out your debts.
