Federation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies. You should not be required to pay high up-front fees for their services.
Meet with a bankruptcy attorney. A bankruptcy lawyer might help you identify any unfair lending practices that can be challenged in court. “Bankruptcy attorneys should look at every claim that is there and see if you’re dealing with an abusive creditor or debt collector,” says Gardner. Most bankruptcy attorneys won’t charge you for an initial consultation.
Prepare and file a petition. Be honest about your assets and liabilities when completing these forms. If you find it too difficult to complete, consult an attorney.
Get credit counseling. You must go through mandatory credit counseling with a court-approved counselor. A list of approved agencies can be found on the Department of Justice Website (www.usdoj.gov).
Meet with a trustee. This is an accountant or a lawyer who will review your case to make sure all paperwork is filed correctly and collect any property that will be transferred to the court. In a Chapter 13 filing, the trustee is responsible for arranging your payment schedule.
Complete a debt education course. You may complete this course only after you have filed for bankruptcy. But you must obtain a certificate of completion for it before you can receive an order of discharge. A list of approved educators can be obtained from the Department of Justice Website at www.usdoj.gov/ust.
Should You File?
If your wages are being garnished: If several creditors have sued and gotten judgments against you that allow them to garnish your wages, you might be in such a financial straitjacket that bankruptcy would bring you significant relief.
Foreclosure is imminent: Chapter 7 is the best option to protect your home if you have little equity in your house. (Each state has a different exemption for how much home equity is protected by bankruptcy.) But Chapter 13 will allow you to keep your home if you have significant equity built up while you restructure your debts.
If you’re raiding your retirement accounts: It’s not a good idea to bankrupt your future to pay debts today. In most states (though not all), retirement accounts are protected in bankruptcy.
If you’re judgment-proof: People of limited means, such as those on Social Security who do not own their homes, are considered “judgment proof.” Creditors won’t recoup much of anything by suing them. Furthermore, Social Security payments cannot be garnished to pay off your debts. In all likelihood, creditors will eventually stop trying to collect.
If you owe student loans: Money you owe from student loans won’t be protected under bankruptcy laws.
If you owe taxes: In most cases, tax debt wont be protected either.
If you have money: The bankruptcy court will look at your assets. If you’ve got a healthy wad of cash sitting in your bank account, you’re not likely to qualify for bankruptcy protection. You should work with your creditors to restructure your debts instead.
This story originally appeared in the December 2008 issue of Black Enterprise magazine.