After all has been done and said and you get a second chance at starting debt-free with a clean slate, be responsible and strategic with all of your financial matters so to avoid falling into the old debt trap. Slowly restore your credit, learn how to get credit responsibly and tackle you new financial challenges.

Live within your means
Whether you filed Chapter 13 or Chapter 7, if you did not exactly win the lottery afterwards, you will have to adjust to a much more modest lifestyle. If you filed for Chapter 13, you will slowly pay down your debt by means of the reorganization plan and live on your set budget until the debts are paid off. You will have to live on your monthly budget and cannot splurge on non-essentials by buying them on credit. For each new loan or credit card you would like to apply for, you will need the court’s permission. Credit does not come easily but especially does not come cheap. Your credit rating will have dropped significantly after having filed for bankruptcy and will stay in your record for up to ten years. Creditors will see you as a high risk borrower and interest rates will be high for any credit that you can get.

Getting credit
Starting to build your credit score right away is key to financial freedom. For Chapter 13 you will have to wait until the discharge is completed to start building your credit, while for a Chapter 7 you can start before your discharge. One of the best ways to build credit is to be approved for a credit card and using it while making payments every month. This may seem ironic, considering that it is very difficult to obtain a credit card with favorable terms after the fact that you have filed for bankruptcy. However, even if the terms are no favorable, you can still apply for one and either never use it or use it just enough so you can pay off the full balance every month.
If you kept your home or your car, be sure you make mortgage or car payments on time every month.

Do the right thing
Instead of mourning your financial reality, stay positive and be thankful that you were given a chance to do things right and straighten out your financial life. Resist the urge to having to spend money on things you do not really need. Instead use that money, even if it is only a small amount every month to pay into a savings account. You will feel really good about that and it will help you build your self-confidence.

Learn from your mistakes
Being responsible means to live within your means, use credit sparsely and responsibly and starting to save money for rainy days. Paying bills on time will help you restore your credit score and will send the right message to lenders who will be more likely to gain you back as a customer, once they see that you set things right after you bankruptcy filing.

With a positive attitude and a slimmed down lifestyle you are well on your way to financial freedom.

When it comes to bankruptcy, one size does not fit all. That is why a series of different bankruptcy laws were designed to address the different needs of bankruptcy filers.

Chapter 7
Chapter 7 is is the most common type of bankruptcy and is referred to as “personal bankruptcy.” However, businesses can also file for bankruptcy under Chapter 7. Successfully filing for Chapter 7 will eliminate all of the filer’s unsecured debts. Assets and property which are not exempt will be liquidated under the supervision of the bankruptcy trustee. The timeline for Chapter 7 is about six months in most cases. If you have filed for Chapter 7 bankruptcy within eight years prior to filing, you will be ineligible to file until after eight years.

Chapter 9
Only a municipality such as a city, county, township or school district may file for relief under chapter 9. This includes revenue-producing bodies that provide services which are paid for by users rather than by general taxes, such as bridge authorities, highway authorities, and gas authorities.

Chapter 11
Chapter 11 of the Bankruptcy Code is generally designed for reorganization, usually involving a corporation or a partnership. A Chapter 11 debtor usually proposes a plan of reorganization to keep its business alive and pay creditors over time. People in business or individuals can also seek relief in Chapter 11.

Chapter 12
Chapter 12 is designed for family farmers or family fishermen with regular annual income. It enables financially distressed family farmers and fishermen to propose and carry out a plan to repay all or part of their debts. Under chapter 12, debtors propose a repayment plan to make installments to creditors over three to five years.

Chapter 13
Chapter 13 allows for reorganization of payments for both individuals and corporations. By filing under this chapter, individuals can stop foreclosure proceedings and may cure delinquent mortgage payments over time. Nevertheless, they must still make all mortgage payments that come due during the chapter 13 plan on time. Another advantage of chapter 13 is that it allows individuals to reschedule secured debts and extend them over the life of the chapter 13 plan. Chapter 13 acts like a consolidation loan under which the individual makes the plan payments to a chapter 13 trustee who then distributes payments to creditors. Individuals will have no direct contact with creditors while under chapter 13 protection. If you filed for Chapter 13 within six years you are still eligible to file, granted you paid at least 70 percent of your allowed unsecured claims.

Chapter 15
Chapter 15 is a new chapter added to the Bankruptcy Code. Chapter 15 provides effective mechanisms for dealing with insolvency cases involving debtors, assets, claimants, and other parties of interest involving more than one country.

Declaring bankruptcy is a very straightforward procedure. Before you file for bankruptcy, be sure to understand the different types of bankruptcies that are suitable for you and which you would also be eligible for. The most two common types for individuals are Chapter 7 and Chapter 13. Before you can file, you will have to have completed an approved counseling course within six months. You then file your bankruptcy papers with the bankruptcy court in your jurisdiction. The court will enter an Automatic Stay prohibiting further collection attempts by your creditors and assign a bankruptcy trustee to you.

Chapter 7
If you decided to file for Chapter 7 you first will have a meeting with your bankruptcy trustee. In this meeting, the trustee will go over the papers and information you filed with you. If you are trying to settle disputes with any of your creditors or eliminate certain debts, this will be your opportunity to ask the bankruptcy trustee any questions. Your paperwork which includes all the schedules itemizing your assets and debts are reviewed with the bankruptcy trustee. Sixty days after the Meeting of Your Creditors, you must take an educational course on personal finance management, and will be discharged. Your debts are written off, granted your creditors do not object to the discharge. You will receive your Chapter 7 discharge 60 days after the meeting of your creditors.

Chapter 13
When you file for Chapter 13, a reorganization of debt with a payment plan, you have to include a draft and a payment plan with the filing of your Chapter 13 papers, which document how you will reorganize your debt and make monthly payments. Just like in Chapter 7 you will meet with your bankruptcy trustee and possibly with your creditors if negotiations of debt payments will take place. Following the meeting, a confirmation hearing will take place in which the judge will rule on whether to accept the payment plan. Based on the judge’s ruling, creditors then will have an opportunity to object during this confirmation hearing. Payments typically begin within thirty days of the ruling during the confirmation hearing. After all payments have been made according to the settlements of the repayment plan, the court will issue a discharge order, canceling out the remainder of the dischargeable debt.

It is important to meet all the deadlines and attend all meeting to which you have been summoned. Missing meetings or deadlines, may result in dismissal of your bankruptcy filing case.

One of the options for filing bankruptcy is to use a non-attorney bankruptcy petition preparer, also known as an NABPP. Under the bankruptcy code a bankruptcy petition preparer can type and prepare bankruptcy forms for consumers as long as they don’t give any legal advice. Legal advice includes things like telling you what bankruptcy chapter to file or what debts to include.

So, how do you file bankruptcy using a bankruptcy petition preparer? First you need to gather all of the information you need to prepare to file bankruptcy and complete your petition. Educate yourself on your bankruptcy court, including possibly sitting in the courtroom for a day to see how the bankruptcy trustee handles pro se bankruptcy filers. When you use a NABPP you will be representing yourself so you need to be comfortable with the process.

Once you are ready, contact a bankruptcy petition preparer. They will have forms for you to fill out that will list all of your information the way you want it on your bankruptcy petition. Once they have prepared your forms they will return them to you to sign and file. In most states the NABPP are not able to collect the bankruptcy filing fees or file the petition for you, so you will have to do that yourself. Your local bankruptcy court will be able to tell you if you can mail the forms or if they must be submitted in person, and how many copies must be filed. Once your petition has been filed, a 341 meeting will be scheduled that you must attend.

When you file bankruptcy you have 3 options to prepare the bankruptcy petition. You can use a bankruptcy attorney, you can file pro se bankruptcy meaning you do it yourself, or you can have a bankruptcy petition preparer complete your petition while you represent yourself in the bankruptcy proceedings.

Bankruptcy petition preparers are given power under Title 11, Chapter 1 § 110 Bankruptcy code. In order to operate as a petition preparer the preparer must follow some rules. The petition preparer must give notice to clients that they are not an attorney and cannot give legal advice. This notice must be signed and filed with any petition that is prepared by a non attorney bankruptcy petition preparer.

A bankruptcy petition preparer can’t tell you whether you should file chapter 7 or chapter 13, or which papers to file. The preparer can only complete the petition as you direct. Using a bankruptcy petition preparer is best for people that understand the bankruptcy law, are comfortable representing themselves in front of the trustee, and those that have few assets to protect.

The stigma of filing for bankruptcy remains persistent despite the changing face of bankruptcy. Because of it, many ill conceived notions are never really rectified by bankruptcy courts. Here is what you need to know that bankruptcy courts will not tell you.

Bankruptcy filers come from all socioeconomic backgrounds
Bankruptcy can happen to anybody. There are many reasons why people file for bankruptcy and contrary to common belief, not all bankruptcy filers are poor as evidenced by the likes of Donald Trump, who has filed for bankruptcy before. Many factors can be out of your control. During an economic downturn losing one’s job without a quick recovery and hopes of finding a new one can force previous high earners into bankruptcy. Sudden illness can also be a factor for having to file for bankruptcy. So are bad investments, slumping real estate values, divorces and many other unexpected life changes.

Not all bankruptcies are created equal
It is important to understand that each bankruptcy case is different. Also, there are certain debts that will not be discharged in any bankruptcy filing such as child support, student loans or outstanding taxes. So be sure to know the advantages and disadvantages of filing for bankruptcy Chapter 7 versus Chapter 13 and how the law will pertain to your particular case. For example, if your assets include property you may be better off filing for chapter 13 if you intend to continue making payments on your home in order to keep it.

Not all is lost
Filing for bankruptcy does not necessarily mean that all assets including your home must be liquidated in order to pay off creditors. In certain circumstances you may have more leverage than the bankruptcy court will tell you. For example, if the mortgage amount of your home is higher than the current value of the home, creditors will most likely not be interested in seizing your home which leaves the opportunity open to keep it and continue making payments on it. Be sure to discuss the homestead exemption with your lawyer. The homestead exemption states, that if the equity in your primary residence is below a certain threshold (this varies from state to state), you may keep your home.

Your credit score is not ruined forever
Although filing for bankruptcy will lower your credit score and will stay in your credit report for ten years, not filing for bankruptcy and missing payments on debt could be far more damaging. Once you file for bankruptcy you have a chance to restore your credit immediately by making on-time payments on loans whereas struggling to make ends meet and not being able to afford payments to pay off debt can send you into a downward spiral indefinitely affecting your credit score negatively.

Prioritize debtors – family and friends come last
Although you may have the best of intentions by paying back your family first, this is a big misstep and will backfire since all property and monies transferred within a year of filing for bankruptcy to relatives, acquaintances, business partners or friends are recoverable by the bankruptcy trustee. Remember, all assets and everything that was sold or transferred within two years of filing bankruptcy must be listed in the bankruptcy filing. Hiding assets or lying about property can have your case dismissed and worse, land you in jail for perjury.

Bankruptcy is a new beginning – not the end
Going through bankruptcy is an emotionally straining process which affected filers paint as a hopeless and shameless act. It does not have to be. It is important to educate friends and family so they can understand what you are going through and provide emotional support to you. If you can retain a positive attitude and look at the benefits of filing for bankruptcy, you will come out of it emotionally stable knowing that this will be a new beginning and nothing to be ashamed of.

After deciding to file bankruptcy you’ll have to prepare your bankruptcy petition. One of the most important sections is where you list your debts. If you care filing chapter 7 bankruptcy these debts will be wiped out and your assets liquidated to pay your creditors. If you are filing chapter 13 bankruptcy, you will come up with a payment plan to pay off your debts over 3-5 years. As you can imagine forgetting to include a debt could cause problems.

Delays

Not including a debt could cause delays by extending the time to discharge when you have to file an amendment to get the debt included. If your bankruptcy has already been discharged you will have even more problems and wasted time.

Debt Not Discharged

In the end you may have to pay the debt if you can’t get it included in the petition. Although your debts are discharged in a ch 7, any debts you don’t include in the petition are never notified that you have filed and therefore can’t respond. Because of this, you still owe the debt.

If you want to avoid the problems associated with forgetting to include a debt when you file, ordering your credit report can help by having a record of all the debts you owe right in front of you.

Being organized and having all your paperwork readily available once you have made the difficult decision to file for bankruptcy is half the battle. Paying close attention to deadlines and any other parameters instructed to you by the court is paramount for a smooth and painless procedure.

Before you can file for bankruptcy, you must obtain credit counseling within 180 days prior to filing. If unusual circumstances prevent you from receiving credit counseling from an approved agency during a 5-day period, the court may excuse you temporarily but you still must fulfill your obligation within 30 days, in some cases 45 days, after you file.

To file for bankruptcy you will need these documents to complete your bankruptcy petition and show proof of your financial situation to the trustee:

* the bankruptcy petition forms
* a list of all your creditors
* paperwork for your assets and liabilities
* list of current income and expenditures
* copies of all pay stubs received by you within 60 days- 6 months before filing
* proof of any other income
* a certificate from the approved non-profit budget and credit counseling agency that describes the services provided to you and a copy of the debt repayment plan, if any, developed by that agency
* a record of any interest that you have in an individual retirement account
* past 2 years tax returns

These items will help you or your attorney complete your bankruptcy petition, and your attorney to do due diligence to ensure you are not hiding assets.

The circumstances and causes of your bankruptcy filing are important factors that may or may not impact your security clearance. While your security clearance may be affected, it is not automatic.

For military personnel, much scrutiny is given to determine whether you are disciplined and responsible. How you deal with your financial obligations often times may be an indicator of your ability to act responsibly. Therefore a close look will be given to whether the bankruptcy was caused by events beyond your control such as medical bills or by plain irresponsibility. Also your job performance, collegial relationships recommendations of your chain of command and co-workers are all important factors to decide whether you are a flight risk and if you should be given security clearance.

If you are in good professional standing and are confident about your performance and recommendations, bankruptcy filing should not be of concern. The fact that you are drowning in debt – regardless of whether you file for bankruptcy or not – may reflect unfavorably on you and jeopardize your clearance. In that case, not filing for bankruptcy, despite your dire financial situation, may be a red flag and you are more likely to be considered a security risk. Therefore, filing for bankruptcy can shed a positive light on your responsible behavior and eliminating your debt may make you less of a security risk.

The assumption that filing for bankruptcy is a straightforward process, in which you only need to fill out some paperwork, is a common mistake. Bankruptcy laws are complex and are best approached with the legal expertise of a reputable bankruptcy attorney. In addition, each case is different, so working with a bankruptcy attorney who knows how to represent your specific interests to achieve the most advantageous terms in your case is essential. Most cases of filers who are not represented by a bankruptcy attorney are dismissed. But there are more reasons you should not go it alone:

1. Bankruptcy petitions, forms and schedules are complex. Inadvertent errors can easily slip in when filling them out causing your case to be dismissed, or lost property that could have been saved by an experienced bankruptcy attorney.

2. Meeting deadlines are crucial for success in bankruptcy filing. Overwhelming pressure to meet deadlines can cause petitions and forms to be incomplete further delaying the process resulting in missed deadlines.

3. In the case that you face objections, your lack of expertise to respond to an Objection to Exemptions or to an Objection to Discharge can be devastating causing you to lose property or your case to be dismissed.

While you need to consider the cost of hiring a bankruptcy attorney, also consider what is at risk. It is a worthwhile investment, especially if you are trying to save your home. Filing bankruptcy pro se is best for those that are experienced with the bankruptcy law, or have no assets.