What Happens When You File for Bankruptcy
If you've found yourself in the unfortunate position of not being able to keep up with your bills, and disputing your debts with a debt verification letter or a 609 letter hasn't worked, you may need to consider filing for bankruptcy.
Before you do that, though, it's important to make sure that you know what happens when you file for bankruptcy. That way, you can decide whether bankruptcy really is the right choice for you. After all, whether you're considering Chapter 7 or Chapter 13, it's clear that filing for bankruptcy isn't something to take lightly.
Because filing for bankruptcy is such a serious matter, you'll want to make sure you have the facts. Read on to learn more about what bankruptcy is, how it works, and how DoNotPay can help simplify the process for you.
What Happens When Declaring Bankruptcy?
If you find yourself struggling to pay your bills and facing the prospect of losing everything, you may have no choice but to file for bankruptcy. One of the most important things that happen immediately upon filing for bankruptcy is that an automatic stay is placed on any debt collection attempts that you are dealing with.
This means that the harassing phone calls and letters you've been receiving from mortgage companies, credit card companies, debt collectors, and others should stop immediately. They are to refrain from contacting you while the bankruptcy process is sorted out. In addition, wages cannot be garnished, and no money can be deducted from your bank account.
Will I Lose My Property When Filing for Bankruptcy?
The answer to this question depends in part on what type of bankruptcy you file for and what state you live in. Chapter 7 bankruptcy makes it more likely that you will lose at least some of your property than Chapter 13.
Let's take a closer look at how these two types of bankruptcy differ.
|Chapter 7 Bankruptcy||Chapter 7 bankruptcy filers generally have lower incomes and may be expected to surrender at least some of their property as a means of paying off their debts. This is because filers for Chapter 7 are seen to be unable to pay off their debts through any other means, even if a payment plan was put in place. Certain types of property may be protected from surrender, however. These include retirement accounts, your house, and your car.
If you're not sure what the law says about property surrender in your state, you may want to consult with an attorney. Of course, consulting with attorneys can come with a hefty price tag, which isn't ideal if you're considering bankruptcy.
|Chapter 13 Bankruptcy||With Chapter 13 bankruptcy, you may not need to surrender your assets. Instead, you will work with your creditors to develop a plan to pay off your debts over the next 3-5 years.
Keep in mind, though, that if you fail to follow the payment plan, your assets could still be subject to surrender.
What Happens to My Credit if I Declare Bankruptcy?
Filing for bankruptcy can help you get out from under the thumb of debt collectors, but it can also have a severely negative impact on your credit. This is the biggest downside of filing for bankruptcy.
A bankruptcy on your credit report can knock your credit score down considerably. While it's impossible to put an exact number on how much your score will drop because there are so many other factors involved, it will certainly impact your ability to get credit at reasonable rates.
How long does a bankruptcy stay on your credit report? A Chapter 7 bankruptcy can stay on your credit report up to 10 years after it was filed, and a Chapter 13 bankruptcy will remain on your report up to 7 years. That's a long time to have a reduced ability to get credit at decent rates, so you always want to make sure you don't have any other options before filing for bankruptcy.
What Does Bankruptcy Not Do?
Bankruptcy will not necessarily wipe away all your debt. Some types of debt cannot be erased through bankruptcy. These include:
- Student loans
- Child support payments
- Recent tax debts
How Much Does It Cost to File for Bankruptcy?
How much it costs to file for bankruptcy will depend in part on what type of bankruptcy you choose. The cost to file for Chapter 7 is $335. For Chapter 13, it is $310.
You will likely also need to pay a credit counseling fee as part of the process. This can often cost around $50.
How to File for Bankruptcy Yourself
It is technically possible to file for bankruptcy on your own, although doing so correctly without an attorney can be quite challenging. In brief, the steps to file for bankruptcy on your own are as follows:
- Collect all the appropriate documents
- Take credit counseling
- Fill out the appropriate forms
- Get your filing fee and file the forms in court
While the process will obviously continue from there, those are the steps you will need to take just to get the ball rolling with the bankruptcy court. The process is not easy and is full of possibilities for error. For this reason, many people choose to hire an attorney to help them file for bankruptcy.
Attorneys are costly, however. Thankfully, now there's an easier way to get help with filing for bankruptcy: DoNotPay.
How to File for Bankruptcy With the Help of DoNotPay
If you want to file for bankruptcy but don't know where to start, DoNotPay has you covered in 5 easy steps:
- Search for File for Bankruptcy on DoNotPay.
- Put together a list of your debts, expenses, and assets. If you need help accessing information like your credit report, DoNotPay can help you get your report.
- Let DoNotPay walk you through your bankruptcy options and help you determine whether a Chapter 7, Chapter 12, or Chapter 13 bankruptcy is right for you.
- DoNotPay will then help find the best credit counseling course near you, which you need to complete before filing your bankruptcy forms.
- Lastly, DoNotPay will gather all of the forms you need (including available fee waivers) and help you locate your nearest bankruptcy court. All you have to do is complete the required forms, prepare your filing fee, and file the application with your local court.
Why Use DoNotPay to File for Bankruptcy?
DoNotPay can help you navigate the process of filing for bankruptcy with our robot lawyer service. Just give us the information on your case, and we'll help you get the right forms and file them in the right place. (Keep in mind that we currently only assist individuals, not corporations.)
How Else Can DoNotPay Help You?
DoNotPay can help make your life easier in so many ways. Use DoNotPay to knock over bureaucratic and legal hurdles in your path. DoNotPay can help you:
- Fight parking tickets
- Pay bills
- Find Section 8 housing
- Close accounts
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- And so much more
Check out DoNotPay today to see all that it has to offer.