I've had a few people ask me about filing for bankruptcy and what it entails, so I thought, "I will be servicey!!" Before I go any further, though, disclaimer: I am not a lawyer and I am not legally able to give you any legal advice. Any. At all. This is only for information purposesAlso, you'll need to know that every state has different ways of handling things, so what I write here will be based on Tennessee laws. Bankruptcy has plenty of federal guidelines that don't give too much wiggle room, from what I've found, but it's best to consult a professional, which leads me to my first point:
1) You will probably need a lawyer. Now, you can represent yourself, but ugh. There is so much paperwork and you have to know the legalese to make sure that everything is filed properly. If you are an SJ in the Meyers-Briggs typology model, you can probably swing this. I am not, and neither is Three. Hence, lawyer. Depending on the size of your town, you may have one or several lawyers that can do this for you. With us being in a midsize city, we had a lot of options, thankfully, and Three set up an appointment with a lawyer that had the best ratings. I mean, neither of us have much experience in this lawyer-searching, so we found this was the best way for us. The lawyer will most likely give you a free consultation to discuss your options. We called and got a meeting scheduled, which as of yet, is one of the least painful parts of the process, which may be surprising, considering #2.
2) Your meeting with the lawyer can best be summed up here: be prepared to have your entire life and your expenditures laid out on the table. From my experience, it's best to come to your meeting with as much material as possible: pay stubs, bank statements, titles, loan agreements, leases, utility bills, etc. That way, there's less for you to have to return to them and the quicker you can start the process. But they'll ask you all sorts of questions, some of them expected ("How much do you make each month?") and others seemingly out of left field ("Do you own a boat?" Seriously, WTF?). Ultimately, they're trying to see what assets you have and what your monthly budget it, which can actually help you decide which chapter you can file. (We found out that, at the end of the month, we have a grand total of $29 to spend on emergencies/save/etc. Woot.)
3) The two most common chapters of bankruptcy are 7 and 13. Chapter 11 is mainly for failing businesses, and Chapter 12 is for farmers. Chapter 7 is the liquidation form, which is what Three and I are filing. The bankruptcy will stay on our credit reports for ten years, but we are essentially getting rid of all of our debt. It will take care of credit cards, my car, loans from nearly four years ago, etc., but it will not remove alimony, child support, back taxes, or student loans. Luckily, neither Three or I have any of those. Consider bullet dodged. Chapter 13 remains on your credit report for seven years, and you are put on a payment plan. Now, since Three and I don't have a mortgage and our cars are not about to be repossessed, we didn't really get a lot of information on how foreclosures and repossessions are dealt with in either chapter, but I do know that there are laws and procedures for handling that sort of thing. Again, it's best to speak with a lawyer about the specifics.
4) So after all of the education we received from our lawyer when we decided to file Chapter 7, we started the actual pre-filing process. Basically, we have to print out our credit reports, which you can get for free at www.annualcreditreport.com once a year, compile a list of all debts, get the last six months of pay stubs, and take a credit counseling course for $45.
* Okay, the credit counseling course was helpful in providing more specific laws about bankruptcy and also listed alternatives to bankruptcy, none of which would have assisted us, since we're in a bad way financially. There's the 60/60 plan (which is not always accepted by creditors - you pay 60% of your debt within 60 months), debt management, etc., but those are all for people whose situation isn't as dire as ours. And I felt that some of the "suggestions" - Don't go out to eat! Stop getting cable! - were a little condescending, since we've been doing that for months now. I wouldn't call our living austere by any means, but we've definitely gone without. But then I got to thinking, well, this counseling I'm assuming is for people who haven't really THOUGHT about doing what they mentioned, so my annoyance ebbed a tad.
5) Now, the money part. Our lawyer understands that we're not filing bankruptcy for the fun of it, so they are only asking for a portion of what we will need to file. There are court costs that you are required to pay, and our lawyer is charging us $1000 total for assisting us. Luckily, we're only having to pay $200 up front, in addition to the credit counseling and court fees, and then we'll pay the rest off on a monthly basis. I'm assuming that other bankruptcy lawyers do this, but don't take my word for it. Talk to the lawyer about it, which is kind of my mantra for this whole thing.
6) You can now tell your creditors to suck it. Essentially, now you can just tell them, "Hi, assholes, I'm filing for bankruptcy and please call my lawyer if you have any questions." This is what I've wanted to say to several of them, but I've managed to stay somewhat polite. They'll press for further information, of course. It's their job to make sure that they get as much money out of you as possible, and if you file for bankruptcy, they've failed. I explained to one that our bills were just too high, but after the other two asked the same question (with faux concern, none the less), I finally just said, "Look, it's really none of your business. Now stop calling me."
7) Once you get all of this stuff together, you can go ahead and file for bankruptcy, minus #6, as I don't really think that it's a requirement to file. It just feels good and liberating. After you've filed, the only real time that you have to actually show up in court is for the "meeting of creditors." Now, we haven't gotten to this point yet, as we're going to file in March, but from what I've been told, this is where you go before a trustee for the bankruptcy court in your district (there are 90 districts across the good ol' U.S. of A.) and all of your creditors can come there if they have a dispute or just for the hell of it. It's kind of like you're going there to be interviewed, in a way. I'll be sure to give you guys an update when it happens and I'll be armed with more information.
Anyway, I just figured that I'd give a brief overview of what Three and I have been dealing with for the past few weeks. It's a bit of a tiresome experience with tons of paperwork, although ultimately, it's very freeing and just kind of helps you breathe easier. Filing for bankruptcy is not for everyone and just because you can, doesn't mean you should. It's just always best to know all of your options, and remember: I AM NOT A LAWYER. So you know, take what I say with a grain of salt. (And go talk to an actual lawyer.)
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