What Happens When You File for a Bankruptcy?

What Happens When You File for a Bankruptcy?

Filing for bankruptcy is the last resort if you are unable to pay the creditors. To file for bankruptcy, you will be required to file a petition in federal court. As soon as the petition is filed, the court will inform all the creditors to stop approaching you for the debt payments. You will need a professional attorney for this matter who knows the ins and outs of such cases. The court will require information, including the total amount payable, a complete list of your creditors, total income statements, expenses, etc. 

A Trustee is Assigned 

Once you submit your bankruptcy file under chapter 7, you are given a case number along with a bankruptcy trustee. If you don’t know about chapter 7, it states that all your assets will be liquefied except your retirement fund, your house, or the car you drive. This will satisfy a portion of the debt that you have. 

The trustee is an experienced finance person who understands the credit system; he will go through all the credit information. He can also hold a direct meeting with the creditors. 

Automatic Stay 

You will be offered protection against the creditors as soon as bankruptcy is filed. Once a case is filed under chapter 7 or chapter 13, you get an automatic stay. This means that the creditors can no longer chase you for the payment of the debt. These bills can include medical bills, credit card debts, personal loans, etc. 

The Credit Score 

Bankruptcy filed against chapter 7 and chapter 13 does show on your credit score. Chapter 13 of the bankruptcy filing states that you do not need to sell your property to satisfy your debt. Rather you can take 3 to 5 years to pay off your debt partially or fully. However, if you are unable to meet the payment plan, the creditors can surely auction your assets. If you need more information about credit scores, bankruptcy lawyers in Scottsdale can be the right guide.

Debt Relief 

There are a number of steps involved in debt relief, such as dealing with payment methods, meeting the creditors, dealing with your vehicle, etc. This will go smoothly if you have a trustee by your side who will manage things on your behalf. 

Cooperating with the Trustee

It is the filer’s responsibility to stay connected with the trustee throughout the period when the case is filed. You need to consider the trustee to be your best chance at this case. 

Negotiating the Trustee

Some assets are exempted, and some are non-exempt. The trustee can sell the non-exempted asset and sell it to pay off the creditors. The filer can negotiate with the trustee as to what can be sold and what cannot be. If the filer doesn’t want something to be sold, he can pay the asset’s price and keep the asset.   

Bankruptcy filing is an extensive process that needs the filer to be honest throughout the process. If you can’t afford to hire a lawyer, the law also permits you to fight your own case.