They say desperate times call for desperate measures. If you are dealing with overwhelming personal debt, you may very well agree. You may even be considering bankruptcy. If you are mulling this option, it is crucial that you understand everything it entails.
Prerequisites for filing
Filing for bankruptcy protection is a big decision. So you cannot just go down to the courthouse and submit the paperwork on a whim. You must go to counseling first.
Specifically, you must seek credit counseling through an officially sanctioned organization 180 days prior to filing. Pre-bankruptcy credit counseling is an opportunity to:
- Assess your personal financial circumstances
- Talk about options other than bankruptcy
- Discuss a personal budget plan
In most cases, a pre-bankruptcy counseling session will last less than two hours. For your convenience, it can be conducted in person, on the phone, or online.
Simply enrolling in a program is not enough, however. You must actually complete it and provide proof that you did so. The only acceptable proof of this is a certificate of credit counseling completion. Without one, you cannot file for bankruptcy.
It is important to note that only credit counseling services approved by the U.S. Trustee Program can issue these certificates. To ensure no one tries to forge them, these numbered documents are generated through a centralized, automated system.
Do not forget to visit the U.S. Trustee’s website to verify that you are getting your certificate from a counseling organization approved in the correct judicial district. This is the same judicial district where you are filing bankruptcy.
There are different classifications of bankruptcy
Chapters are used to organize different types of personal bankruptcy. Chapter 7 bankruptcy and Chapter 13 bankruptcy are the two types with which most people are probably familiar. In the former, a bankruptcy trustee sells your eligible assets and uses the money from the sale to pay your creditors. It is usually employed when you have way too many outstanding bills and no hope of paying them.
On the other hand, Chapter 13 bankruptcy allows you to restructure your finances and pay your creditors in accordance with a bankruptcy court-approved plan. When you file this type of bankruptcy you have a specific amount of time in which to make applicable payments.
You can find relevant information about Chapter 7 bankruptcy filing requirements here , and Chapter 13 bankruptcy filing requirements here
Debtor education requirements
Before your debt is discharged or erased, you must also complete a debtor education course provided by an officially sanctioned organization. It should cover topics such as how to develop a budget, manage money, and use credit properly.
You can take this course in person, on the phone, or online. It usually lasts roughly two hours — and usually costs $20 to $100.
Upon completion of the course, you should receive a certificate to show you finished it. This certificate is different from the one you got after completing your pre-filing credit counseling and must be issued by a debtor education provider approved in the judicial district where you filed for bankruptcy.
Bankruptcy will affect your credit
Bankruptcy may have lasting ramifications in terms of your credit. Your credit report may reflect the bankruptcy for several years and future lenders may take it into account when you want to apply for a loan or credit. However, it is illegal for them to discriminate against you based solely on the bankruptcy.
Before you file for bankruptcy in Nevada or Washington, contact Debt Rescue Law to learn how we may be able to help. You can reach us at (833) 707-1234.