The idea of bankruptcy may cause you some stress and concern. You may not know where to begin, or you may even fear getting started.
Despite often getting a bad name, bankruptcy offers a way to start afresh and rebuild your credit. With a Chapter 7, you will not have to repay unsecured debts, such as medical and credit card bills. Chapter 13 involves a repayment plan for a portion of the debt and allows you to maintain many assets. To enjoy these benefits, you have to meet certain conditions.
If you want to go the route of Chapter 7, then you have to take a means test. This simply means showing you qualify for dismissal of debt by having a low income, few assets or assets worth less than the debt you owe. This step just ensures that people who can afford to partially repay debt do not abuse the system. Even if you do not think you would pass the test, it is worth taking anyway, just in case you do. It is not a commitment to choosing Chapter 7.
No matter which chapter you file, some requirements are the same. You will have to complete credit counseling within 180 days before you file. You can do so in person, via phone or online, but it must be through an organization approved by the U.S. Trustee Program. The course covers bankruptcy alternatives and your personal finances and helps you establish a budget. It lasts 60 to 90 minutes and costs a small fee.
After you file, you must also take a debtor education course before the judge discharges any debts. The purpose of this class is to help you manage your finances and debts so you can avoid being in this situation again. You have the same completion options as with credit counseling, but the session lasts for closer to two hours and cost a little more. In both cases, you will receive a certificate showing that you fulfilled the requirement.