Bankruptcy Petition – Things To Keep In Mind Before Filing For Bankruptcy

A bankruptcy petition is the application which a debtor submits in court to declare bankruptcy. Once the bankruptcy petition is approved by the court, then the proceedings to repay the debt officially starts. This document is very important as it not only starts the repayment proceedings, but also prevents any creditor to file a lawsuit against the person filing for bankruptcy.

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There are following forms you need to fill as part of the bankruptcy petition which are categorized under different chapters:

Chapter 7 and chapter 13 – Form B1 for voluntary petition; Form B21 which is a statement of your social security numbers; Form B3 which is an application that you would pay filing fee in installments; Form B8 which is your statement of intention; Form B4 or a list of creditors; Form B7 which is your financial affairs statement.

It is always recommended to take out two print outs of the forms – one for practice and the other for final bankruptcy petition, along with the instruction manual. Do take utmost care before filing the forms and do fill out all the information you have as it is these bankruptcy petition forms that would determine if your assets are exempted to seized.

When you are filing your petition, in addition to filing bankruptcy forms, you also have to add the following details with you bankruptcy petition:

• Statement from your creditors about how much you owe.
• Complete details of your creditors including name and address.
• The total amount of debt you owe to each creditor.
• Details of your monthly payments.
• Your account number.
• Details of the person who is under debt, you or your spouse.
• The date or the year you went under debt.
• The stubs from your current paycheck.
• Photocopied documents that show your source of income if you are unemployed.
• Mortgage details.
• Copies of the documents of your car or any other vehicle you owe.
• Tax return copies.
• Court proceedings copies, if any.

After all these above mentioned details have been complied, you file the bankruptcy petition and the petition form along with these details in a court (and any other details, as might be required by the court).

Before filing for bankruptcy, another thing that you need to keep in mind is the chapter under which to file your bankruptcy; the most common chapters being chapter 7, chapter 13 and chapter 11.

Chapter 13 is not a discharge of debts but a repayment program in which along with the bankruptcy petition form you need to submit a repayment plan as well. The plan to pay back all the creditors is the most important part of chapter 13 which is suggested by the debtor himself/herself. The debtor’s income is the basis on formulating the plan. Apart from the aforementioned documents, for filing a chapter 13 bankruptcy petition, you also require a list of assets you want to be exempted and the financial information of your spouse, if applicable.

After the petition is reviewed, a trustee is appointed to check the accuracy of the documents submitted along with the petition and to see that the creditors are paid according to repayment plan.

If you file for chapter 7 bankruptcy, then all your non-exempt assets are seized and sold off to generate money to pay off your debts. The process of filing for a chapter 7 bankruptcy is same as that of chapter 13 but instead of the repayment plan details, you need to submit proof that you own property. You also need to attend a briefing related to credit counseling 180 days before filing the bankruptcy petition.

Under chapter 11 bankruptcy, the debtor and the creditors enter an agreement according to which the debtor’s debts are restructured and his/her business is allowed to continue. When you file a chapter 11 bankruptcy petition, you also need to submit your financial affairs details and a list of all assets.

Before deciding to file for a bankruptcy petition it is recommended to meet a lawyer who specializes in bankruptcy law as s/he would be able to guide you regarding filing the forms, adding the documents and deciding which bankruptcy to file for.