How to Go Bankrupt - But Maybe There Are Other Options?

How to Go Bankrupt - But Maybe There Are Other Options?
By J. P. Bastian

"How to go bankrupt?" is a question most people ask themselves after a long, painful realization that there is no option other than to file personal or business bankruptcy. Most people don't want to, but they often are facing lost jobs, medical bills, the death of a family member, business changes, mistakes, and simply bad fortune.

When considering such a drastic measure, it is important to remember the reason for bankruptcy in the first place. While initially bankruptcy was not a voluntary process (insolvent debtors were actually considered criminals and often thrown into "debtor's prison"), the Bankruptcy Reform Act of 1978 was set up to help people - not punish them.

It's also important to realize there are often times alternatives to bankruptcy. We encourage you to always research your options first, and will provide information on this site to help you do so.

When filing a personal bankruptcy, you basically have two options. Chapter 7 and Chapter 13.

Chapter 7 bankruptcies account for up to 65% of filings made in the USA each year. The premise is basically that "non-exempt" assets that you own are supposed to be sold and the proceeds distributed to your creditors. (In reality, most people filing Chapter 7 does not have a whole lot of this kind of property.) There are certain qualifications you must meet before you can file in this way. When your Chapter 7 is completed, you get a fresh start.

Chapter 13 bankruptcies are designed so that you can ultimately repay some or all of your debts but at better terms than you currently have. You debts are restructured, and you can use whatever means you have to pay off your obligations under the supervision of the courts. You can have up to 5 years to do so, after which you can start afresh.

These are the requirements you must meet in order to file for bankruptcy protection in the U.S.

• Must live, have a residence, property, or place of business in the U.S.



• Must pass a "Means Test" to file Chapter 7



• If eligible for a Chapter 7, you must take a credit counseling course



• For Chapter 7, you can not have been granted a discharge under Chapter 7 or completed a Chapter 13 payback plan within the last 6 years



• You can not have had a bankruptcy filing dismissed within the last 6 months



• For Chapter 13, you must have regular income, have less than $250,000 in unsecured debt (like your credit card debt), and less than $750,000 in secured debt (like your home mortgage

So, if you feel bankruptcy is the best option for you what's next?

1. The Means Test - Do You Qualify?



2. Lots (and LOTS!) Of Documents



3. The Credit Counseling Class



4. Filing, Creditor Meeting & Another Class

More information and tips about these can be found at howtogobankrupt.

Lots of people file their own bankruptcies, and there are even some good online services for doing so. (Personally, I would not feel comfortable doing one myself as there are a lot of rules, and a ton of paperwork.) Our law firm specializes in personal and business bankruptcies at fair and reasonable rate: more tips (and tricks) and do-it-yourself options can be found at howtogobankrupt.

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