Thanks to COVID-19, over 16 million Americans have filed for unemployment within a three-week period. While some of these layoffs are temporary, many of them are permanent as companies struggle to keep their doors open.
If you recently lost your income, staying on top of your essential bills may seem impossible. The situation becomes even more difficult if you have have a lot of debt.
But there is hope. Keep reading to learn how to file for bankruptcy so that you can get your life back on track.
Decide If You Qualify for Chapter 7 or 13
Not everyone qualifies for bankruptcy, so your first step is to see if you qualify and find out which type is best for you.
A Chapter 7 bankruptcy is often referred to as the liquidation bankruptcy. All of your property is sold and used to pay off your outstanding debt. The government has set up a Chapter 7 Means Test to determine if you qualify.
On the other hand, a Chapter 13 is referred to as the reorganization bankruptcy. Instead of having your property sold off, you will receive a court-mandated payment plan to settle your debts. To qualify, you must owe less than $394,725 in unsecured debts.
Complete the Bankruptcy Forms
Once you discover you qualify, then you should ask yourself, “when do I need to file for bankruptcy?”.
To fill out the bankruptcy forms, you’ll want to gather the following items:
- Tax returns and paystubs from the past two years
- Recent statements from your bank accounts
- Documents related to your assets, such as retirement accounts
- Documents related to your outstanding debts
These forms can be extremely difficult and time-consuming to fill out. If you want to avoid mistakes and speed up the process, consider hiring the help of a bankruptcy attorney.
Take a Credit Counseling Course
One of the main steps of filing a bankruptcy is that the filing person completes a credit counseling course. This course is required and must be approved by the Department of Justice.
During this course, your instructor will gather all of your financial information. Then, together you will develop your future budget and repayment plan.
You’ll need your certificate of completion when you go to file your actual application.
File Your Application With the Court
Once you’ve completed your bankruptcy forms and completed your credit counseling course, you’re ready to officially file for bankruptcy.
Head to your local courthouse and find out where you need to go for bankruptcy filings. Here, your forms will be collected and uploaded. In exchange, you’ll receive a bankruptcy case number and a date for your 341 meeting.
Now You Know How to File for Bankruptcy
These are the simplified steps of how to file for bankruptcy. While the steps may seem simple, they do involve a lot of work and a lot of time. Strongly consider if this is the best option for you before you commit to the bankruptcy process.
If you want to learn about other financial options that may be available for your situation, head to the Toolkit section of this site.