Financial experts suggest that filing for bankruptcy should be the last resort as it is always associated with a social stigma. Moreover, if you file for bankruptcy, it stays in the credit report for a period of 10 years. Nevertheless, filing for bankruptcy enables a debtor to make a fresh financial start. As of October 17 2005, a new law pertaining to bankruptcy was introduced. The new law brought about certain changes in the manner in which a debtor could file for bankruptcy.

How to file for bankruptcy is a common question and it will not be wrong to say that under the able tutelage of a lawyer, the entire process of filing for bankruptcy can be taken effectively to completion.

Prior to declaring bankruptcy make sure that you have tried out all avenues of becoming debt free and you have no other alternative except for declaring bankruptcy. Once you have decided to declare bankruptcy it is best to have a sound knowledge of the entire process. A brief overview of how to file for bankruptcy is given below-

An overview of how to file for bankruptcy

Selecting a good lawyer

You can hire a lawyer who can take care of the legal aspects of the case. It is best to work with a lawyer directly and not a paralegal professional. After filing for bankruptcy, the "automatic stay" period comes into force. Once you have filed for bankruptcy, a Notice of Commencement is sent to your creditors. This puts an end to the harassing calls from the creditors. This is followed by the "341 meeting". This is a meeting between the creditors. It is important that prior to the 341 meeting (named after the Bankruptcy Code section); you have clarified all your doubts and divulged all details of your debts to your lawyer.

Note: The fees charged by lawyers differ from one lawyer to another. In some cases, lawyers charge a flat fee while in few other cases, the amount differs. Availing a flat fee is usually desirable. Your dwelling place also determines the fees of the lawyers, whether you are staying in a big city. Few lawyers will allow you to pay in installments.

Credit counseling

As per the new bankruptcy law, credit counseling has been made mandatory. Credit counseling should be availed from a credit counselor approved by the U.S Trustee and should be availed within 180 days of the date of filing for bankruptcy.

Considering the type of bankruptcy

You could consider filing for either Chapter 7 (Liquidation Bankruptcy) or Chapter 13 (Adjustment of Debts) bankruptcy. However, filing for Chapter 7 bankruptcy has been made more stringent due to the means test.

Assets for liquidation (Chapter 7)

If you are filing for Chapter 7 bankruptcy it will be determined whether you have assets that can be liquidated so that your creditors can be paid back.

When filing for Chapter 13

In case you are filing for Chapter 13 bankruptcy, a 3 to 5 year payment plan is worked out. During this period you can repay as much as you can after taking BAPCPA (Bankruptcy Abuse Prevention and Consumer Protection Act) means test.

Notice of Discharge

A deadline for the creditors is set so that they can file lawsuits to challenge the discharge of a particular debt or entire debt. In case of Chapter 7 if no lawsuits are filed, a notification will be sent to you indicating that your debts have been discharged. The deadline set is usually the 60th day after the meeting.

In case of Chapter 13, notice of discharge is received 30 to 60 days after the final payment has been made. Student loans as well as certain types of taxes are not discharged in case of Chapter 7 and Chapter 13 bankruptcy.