Filing for bankruptcy is a highly effective way for people to resolve their debt problems. Reports of high-profile bankruptcies are common. For example, the privately held maker of plasic bottles Constar International Holdings, LLC recently filed for Chapter 11 bankruptcy, it's third bankruptcy in five years. If you contemplate filing for bankruptcy, here are some initial steps.
- Step 1: Gather information: Organize all the relevant information related to your finances. Make a list of all your creditors with details of how much you owe. List all your assets with their respective values. If you do not know the precise value of an asset, use your best estimate. Record your income and expenses. Keep copies of recent bank statements, mortgage statements, credit card bills, etc.
- Step 2: See an attorney: An experienced bankruptcy attorney can advise you of your options — for example, whether Chapter 7 or Chapter 13 bankruptcy is appropriate for you. Your lawyer can also advise you on possible alternatives to bankruptcy, such as loan modification and refinancing.
- Step 3: Take the means test: To qualify for Chapter 7, if your earnings are above the state median level and your debts are mainly consumer debts, you are required to undergo a means test. The means test is a test of income designed to prevent people who have sufficient income to repay their debts from filing for Chapter 7 bankruptcy. If you do not pass the test, you may still be able to file for Chapter 13 bankruptcy.
- Step 4: Get credit counseling: Under the Bankruptcy Code, you are required to undergo credit counseling from an approved provider before you can file for bankruptcy. This counseling is designed to ensure you have explored all your options before filing. Once you have completed the counseling course, you are issued a course completion certificate.
- Step 5: Prepare the petition: The bankruptcy petition is a fairly long document. Your attorney can help you with this.
- Step 6: File the petition: File the paperwork with the bankruptcy court and pay the filing fee. The "automatic stay" then goes into effect. This means that most creditors can take no enforcement action without the court's permission. Approximately a month after the filing, a creditors' meeting is held, at which time a trustee is appointed. You are required to attend a post-filing debtor's education course.
Contact an experienced Daytona Beach bankruptcy lawyer for advice on your options.