It may be helpful to take these steps to prepare for filing for bankruptcy, whether you're working with a bankruptcy attorney or filing on your own online.
Written by Attorney Jonathan Petts.
Updated September 3, 2020
How Do I Prepare For Bankruptcy?
Struggling with debts that you cannot pay is stressful and frightening. Many people are overwhelmed and do not know where to turn. They may consider filing for bankruptcy relief, but they do not know how to prepare for bankruptcy.
Upsolve can help you prepare for bankruptcy with our no-cost bankruptcy services. If you need a fresh start, take our screener to see if you're eligble to use our free app. Our mission as a non-profit organization is to help low-income households like yours file Chapter 7 even if you cannot afford to hire a bankruptcy attorney.
The First Step to Prepare for Bankruptcy — Get Your Income Statements Together
The first step to prepare for bankruptcy is to gather proof of your income. Copies of your tax returns and copies of proof of income for the past six months are required when you file a Chapter 7 case.
To prepare for bankruptcy under Chapter 7, you must complete the Chapter 7 Means Test. The Means Test compares your income to the average income of households in your state. To qualify to file under Chapter 7, your average income must be below the median income in your state.
However, if your income exceeds the median income, you have a second chance to qualify for Chapter 7 bankruptcy relief. You must complete the second section of the Means Test to determine if your disposable income is below a certain amount. If so, you should be able to file under Chapter 7.
Because the Means Test measures your income, you must prepare for bankruptcy by gathering proof of your income. The test averages your income for the six months before filing the bankruptcy case. As you prepare for bankruptcy, you also want to have a list of your monthly living expenses to complete the Means Test and your bankruptcy forms.
Prepare for Bankruptcy By Getting Copies of Your Credit Reports
The second step you want to take as you prepare for bankruptcy is to obtain copies of your credit reports. You can get free copies of your credit reports online every 12 months.
You want to compare the creditors on your credit report to the list of creditors you make as you prepare for bankruptcy. It is very important that you include each creditor you owe in your bankruptcy forms. You must include all secured creditors, unsecured creditors, and priority unsecured creditors as you prepare for bankruptcy.
If you fail to include a creditor as you prepare for bankruptcy, you will still owe that creditor after your bankruptcy case is complete. In addition, when you sign your bankruptcy forms, you are affirming under oath that you have included each debt that you owe in your bankruptcy filing.
Getting copies of your credit reports as you prepare for bankruptcy can be very helpful in ensuring you do not accidentally forget a creditor.
If you are beginning to feel overwhelmed, let us help you prepare for bankruptcy. To make the process of filing a Chapter 7 bankruptcy case even simpler and more affordable, get started with Upsolve, a Harvard Law School-grown nonprofit organization that provides a tool to prepare your Chapter 7 bankruptcy forms to individuals with low income at no cost.
Prepare for Bankruptcy By Making a List of Your Assets
In addition to reporting your income, expenses, and debts in your bankruptcy case, you also need to report your assets. You need to list all the property you own and the value of that property.
However, you do not need to list each household item and piece of clothing you own as you prepare for bankruptcy. Many of these smaller items are grouped together in your bankruptcy forms.
For more expensive items such as real estate and vehicles, it is helpful to have the tax appraisal to assist you as you value the property. For vehicles, you can also use NADA and Kelly Blue Book online to determine the value of the vehicles.
It is also helpful to have copies of your most recent bank statements and statements for other financial accounts (i.e. retirement accounts, life insurance, etc.) as you prepare for bankruptcy. You need to list the value of each asset as of the day you file your bankruptcy forms.
Prepare for Bankruptcy By Completing Your Credit Counseling Course
You are required to finish a Credit Counseling Course as you prepare for bankruptcy. The bankruptcy course can help you prepare for bankruptcy because it asks many of the same questions about income and expenses that you will answer as you complete your bankruptcy forms.
The course is available online for a small fee. It can be completed in less than two hours.
Once you complete your course and your bankruptcy forms, you are ready to file your Chapter 7 case with the bankruptcy court. If you are feeling nervous about completing the forms without a bankruptcy attorney, we want to assure you that you can do this.
We have developed a system that is simply and easy to use to help you complete your bankruptcy forms. In addition, an attorney reviews your bankruptcy forms before you file the forms with the bankruptcy court. We are with you during each step of the process to prepare for bankruptcy so that you feel confident as you file for Chapter 7 debt relief.
Prepare for Your Bankruptcy Hearing
After you file your Chapter 7 bankruptcy forms, the bankruptcy court schedules the First Meeting of Creditors. Your bankruptcy hearing is conducted by the Chapter 7 trustee assigned to your case. To prepare for bankruptcy hearings, you should review your bankruptcy forms and any instructions provided by the court.
The First Meeting of Creditors is a five to ten-minute hearing. The Chapter 7 trustee asks questions about your income, expenses, debts, and assets. It is the same information that you included in your bankruptcy forms.
Most Chapter 7 cases are determined to be no-asset cases after the bankruptcy hearing. A no-asset case means that the Chapter 7 trustee is not selling any property to repay your unsecured creditors.
Bankruptcy exemptions protect the equity in your assets from the trustee and the court. As you prepare for bankruptcy, you review the bankruptcy exemptions to determine if any property may be at risk. The majority of Chapter 7 cases filed are no asset cases.
Prepare for Bankruptcy Discharge
The course can be completed online in about two hours. The charge is usually $10 for the second course if you use the same company you used for the Credit Counseling Course.
Because you cannot receive a bankruptcy discharge without completing the second bankruptcy course, it is important to finish this course and file the certificate as soon as possible after filing your case. If you do not complete this step, you will not receive a bankruptcy discharge.
Upsolve Can Help You Prepare For Bankruptcy
If filing a Chapter 7 bankruptcy case seems like a good solution for your debt problems, request additional information from Upsolve. We are a non-profit organization whose mission is to assist low-income families throughout the United States who are in financial distress.
Watch videos of our past users as they explain how using our no-cost bankruptcy services helped them get out of debt and rebuild after a financial crisis. You can be one of these success stories too! Begin your journey to a debt-free life today!