How to Declare Personal Bankruptcy

By Stephanie Mojica

Choosing to declare bankruptcy is a personal decision that can have ramifications on your financial and even professional life for seven to 10 years. People who are unable to pay their debts as agreed have two choices when deciding whether to file bankruptcy -- Chapter 7 and Chapter 13. Chapter 7 is complete forgiveness of most debts, while Chapter 13 lowers some debt such as credit cards and restructures them into a court-supervised repayment plan. Knowing the right regulations, whether or not you obtain an attorney, is essential to successfully complete a bankruptcy case.

Write a list of your debts, including student loans, child support, alimony, daycare costs and utility bills. This is a required set of information whether you file bankruptcy on your own or hire an attorney.

Write a list of your assets, including interest in a house or other real estate properties such as land, stocks, savings accounts, expensive jewelry and other personal property. You cannot lose your retirement account in bankruptcy but will need to report it anyway. Do not try to hide or give away your property to others as this is considered a serious crime. You must tell the entire truth when trying to declare bankruptcy to avoid possible federal imprisonment and/or fines.

Copy any paycheck stubs, bank statements and tax returns. If you do not have all your financial documents, you will need to check with your employer, the Internal Revenue Service (see Resources below) or your bank to get new copies of this required information. The IRS or your bank may assess a small fee to cover the time spent looking for your documents.

Decide whether you wish to declare Chapter 7 or Chapter 13 bankruptcy. Chapter 7 is a complete forgiveness of most debt, with the exception of student loans, criminal fines and child support. Chapter 13 allows some debt to be reduced, but requires a repayment plan over three to five years. Chapter 7 bankruptcy usually means losing assets such as a house and stays on a credit report for 10 years, while those choosing Chapter 13 can often save their home and/or savings accounts.

Visit the U.S. Trustee Means Testing website (see Resources below) if you want to declare Chapter 7 bankruptcy to find out if you qualify. Those people who earn above the median income for their state as determined by the means test may be compelled to declare Chapter 13 bankruptcy.

Visit the U.S. Trustee Credit Counseling website (see Resources below) and select an approved credit counseling service near you. Completing a session of credit counseling and providing a certificate that proves you did this is required by the bankruptcy court whether you want to declare Chapter 7 or Chapter 13 bankruptcy.

Obtain the forms required to declare bankruptcy from the U.S. Bankruptcy Court website (see Resources below.) If you are not going to hire an attorney, print these forms and instructions and complete the paperwork as required. There are extensive manuals online regarding how to complete a bankruptcy application.

Take your papers and payment to your local bankruptcy court, unless you secured the services of an attorney. Pay any required fees, which usually are about $275. If you cannot pay the full amount at the time you submit your signed paperwork, the court may allow you to undergo a payment plan.

Attend any hearings required by the bankruptcy court. You will be notified of these by mail. If you did not hire an attorney, you will most likely attend two hearings. Those with a lawyer will likely only have to appear in court once. Declaring bankruptcy should take about four to eight months.

About the Author

Stephanie Mojica has been a journalist since 1997 and currently works as a full-time reporter at the daily newspaper "The Advocate-Messenger" in Kentucky. Her articles have also appeared in newspapers such as "The Philadelphia Inquirer" and "The Virginian-Pilot," as well as several online publications. She holds a bachelor's degree from Athabasca University.