What is bankruptcy? and how I do it.?

Bankruptcy is a legal proceeding involving a person or business that is unable to repay outstanding debts. The bankruptcy process begins with a petition filed by the debtor (most common) or on behalf of creditors (less common). All of the debtor's assets are measured and evaluated, whereupon the assets are used to repay a portion of outstanding debt. Upon the successful completion of bankruptcy proceedings, the debtor is relieved of the debt obligations incurred prior to filing for bankruptcy.

Bankruptcy filings in the United States can fall under one of several chapters of the Bankruptcy Code, such as Chapter 7 (which involves liquidation of assets), Chapter 11 (company or individual "reorganizations") and Chapter 13 (debt repayment with lowered debt covenants or payment plans). The most common chapters are 7 and 13.

What the Debtor (filer) Must Do for Chapter 7?

First you and your attorney must attest to the fact that you understand that you are filing factual information and also that data being provided is warranted under existing federal law. This simply means that you understand both the state and federal laws that apply to filing under Chapter7. The required forms under Â§521 and the Means Test in Official Form B22A (which determines your ability to pay certain costs) and numerous other documents are complex for any layman at law and should be handled by an attorney. Filing a bankruptcy has become considerably more complicated since the Bankruptcy Reform Act 0f 2005 became law. It includes, among other things, the necessity that the debtor attends one class or credit briefing before filing. Today, attorneyâ€™s fees for filing a Chapter 7 range from about $1275.00 for a simple filing to as much as $2,500.00 for complex cases. Anyone who attempts to handle his or her own bankruptcy today can reasonably be said to have had a â€˜fool for an attorney.â€™ These filings are just too complex for a non-lawyer to handle properly.

What Must a Debtor (filer) Do for Chapter 13?

Prior to filing the Chapter 13 action, you must complete a U.S. Trustee approved credit counseling briefing. Once completed, a certificate of completion must be filed with your petition. Your case really begins when your attorney files the petition in federal bankruptcy court. When a Chapter 13 action is filed, it places a â€˜stayâ€™ in effect under 11 U.S.C Â§Â§ 362 that prohibits your creditors from harassing you or attempting further collection activities. A notice of your filing will be sent to the entire list of creditors you provided within fifteen (15) days of filing.

In order to qualify for filing a Chapter 13 bankruptcy, the following must be shown:
â€¢ You must have a regular income that will permit you to make the pre-determined payments to the trustee in bankruptcy who will distribute funds to your creditors.
â€¢ You have to show that you have an adequate amount of disposable income so that you can make regular payments to the trustee AFTER covering your current living expenses.
â€¢ You must also show that your disposable income falls within the pre-set limits for both secured and un-secured debts. These limits are updated occasionally and your attorney will be up to date on what they are. In May 2007, these limits were $1-million for secured debts and $337,000 for unsecured debts.