What kind of a form should be filled out?
Bankruptcy petitions require the consumer to file official federal forms which are state-specific and chapter specific. After the form is submitted, the petition will then be heard by the court, and once the order has been made against the consumer (once bankruptcy is official), the creditors will no longer contact the consumer for collections.
How will the debts be paid if the creditors are not allowed to collect?
The court appoints a Trustee to oversee repayment arrangements.
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What is a Trustee?
A Trustee is an agent of the court authorized to liquidate and protect the assets of the consumer and present them to court for final distribution.
How much does it cost to file bankruptcy?
The filing fee for Chapter 7 bankruptcy is $299 while it is $274 for Chapter 13.
However, since bankruptcy is a legal issue, the consumer should be more concerned about the legal fees (lawyer's fee). Rates may be based on where the consumer lives but it is typically in the $1,500 to $2,000 range for Chapter 7 and $2,500 to $4,000 for Chapter 13. The more work for the lawyer, especially as bankruptcy laws change, the more the fees add up.
The consumer that is already facing so many financial problems may wonder how he/she is supposed to pay for all of those fees. The answer to that lies in the approval of the bankruptcy application. If it is successful, most of the debts would be wiped out, if not all, and that would make it much easier to deal with legal costs later.
The sooner the court approves of the application, the better, as the consumer will then receive an automatic stay. An automatic stay means that the creditors can no longer demand payment from the consumer until the case is resolved.
Once payment to the creditors ceases (at least temporarily) the consumer can then redirect his/her funds to cover the legal fees.
What if the consumer cannot afford the filing fees?
-The consumer can apply for a fee waiver or permission to pay installments.
-If the court determines that the consumer's income is less than 150 percent of the poverty guidelines by the United States Department of Health and Human Services (DHHS), and that the consumer cannot even pay for installments, the filing fee maybe waived.
What if the consumer cannot afford a legal counsel (attorney)?
The consumer should seek attorneys that are willing to adjust their fees based on the situation (amount of debt owed and income) and can waive interest payment plans.
An important note on a Chapter 7 case, the lawyer cannot be the consumer's creditor, meaning that the attorney's fee must be paid in full before the case is filed. If the consumer still owes an attorney part of the bankruptcy fee when the case is filed, it becomes noncollectable and the attorney must waive the unpaid balance or else he/she cannot continue to represent the consumer. In a chapter 13, if agreed upon, the entire attorney's fee may be paid through the plan.
If the consumer cannot really afford a bankruptcy attorney, he/she may seek help from:
-"Pro bono" (public service, free of charge) groups.
-Legal clinics at the nearest law schools (some of them may have a volunteer legal service group).
-The consumer may inquire at his/her local bankruptcy court clerk's office for legal advice.
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