Declaring Bankruptcy: When and How to File

An integral component of declaring bankruptcy is determining when and how to file. Generally, these questions revolve around the following matters, including:

• Type of bankruptcy to file

• Residency of debtor when filing

• Timing matters related to the filing

The following article attempts to address the common bankruptcy questions and issues.

Type of Bankruptcy

The integral question is whether a debtor is going to file either Chapter 7 or Chapter 13 bankruptcy, which covers the overwhelming majority of personal bankruptcy cases. In short, having legal counsel’s insight into your specific case, in light of applicable federal and state bankruptcy laws, is important.

• First, not all debtors are eligible to file under Chapter 7. Debtors must not exceed the median income of their state, or in certain cases, pass a means test, as outlined in bankruptcy law.

• Not all debtors will benefit from Chapter 7 either, as debts dischargeable are often limited to secured debts only.

• Homeowners struggling under mortgages or other secured debts will not have these debts discharged.

• Chapter 7 entails a liquidation of all non-exempt assets.

• Chapter 13 does allow limited discharge, but in general, requires the ability of a debtor to repay debts over a period of three (3) to five (5) years.

Residency Requirements Applicable to Filing

Determining one’s residency, in terms of bankruptcy filings, is also critical. This is especially true in prospective Chapter 7 cases, where the exemptions list will likely be a state-specific manner. Additionally, determining what jurisdiction to file the petition for bankruptcy protection is also important. Specific rules on residency are outlined through bankruptcy law, and in turn, debtors should refer to legal counsel to determine their state of residency, as well as where to file in a given state.

Timing of the Bankruptcy Filing

Bankruptcy laws prohibit successive filings of Chapter 7 and Chapter 13 within a period of eight (8) and six (6) years, respectively. If you have filed bankruptcy previously, you may be prohibited from filing again, depending on the timeline of your last bankruptcy filing. Likewise, considering the timing of a bankruptcy filing may also be relevant to case-specific strategies as well. Having the insight and counsel of a bankruptcy lawyer is essential.

Getting Legal Help with When and How to File Bankruptcy

The petition to file for bankruptcy is a complex set of documents requiring extensive documentation related to financial matters, credit claims, current income, current expenses, and assets held. Having legal counsel’s advice via pre-bankruptcy planning is essential, but also, within realm of simply filing the petition, having the representation of a bankruptcy lawyer will also prove invaluable. To learn more about your legal rights and options during bankruptcy, consult with a bankruptcy lawyer in your current state of residence today.