How to Do a One-Day, Do-It-Yourself Bankruptcy
If your debts have become overwhelming and you’re facing a significant financial blow, such as wage garnishment, vehicle repossession, foreclosure, eviction, or utility service disconnection, and you don’t have the money for a lawyer, don't panic. While bankruptcy should be a last resort, you do have options. It’s possible to file a Chapter 7 or Chapter 13 bankruptcy by yourself to avoid or stop these collection attempts. As soon as you file, the court invokes the immediate protection of the automatic stay, which stops creditors from pursuing all collection activities, including phone calls and letters, and mandates utility companies to restore any disconnected services. Filers may also be able to get back repossessed vehicles. By following this timeline, you can file bankruptcy in a matter of hours. (See also: How to File for Bankruptcy)
The Night Before: Gather Your Documentation
To file either Chapter 7 or Chapter 13 bankruptcy, you must provide documentation of your debts, expenses, and income.
Gather bills, account statements, and other correspondence for all of your creditors. This not only serves as a record of what you owe, it also ensures that you have accurate creditor information. Improperly identifying creditors can cause those debts to be excluded from the bankruptcy case, leaving you responsible for them. Pull copies of your credit report from Equifax, Experian, and TransUnion to ensure you list all creditors.
The court also needs to see proof of your income for the past six months. This includes pay stubs, investment account statements, business profit and loss statements, and documentation of unemployment, Social Security, or other social service benefits. You must also include documentation of any child support or alimony payments you receive.
The bankruptcy petition requires you to list your monthly household expenses as well, so gather the bills you receive for utilities, rent or mortgage, and other recurring expenses, such as medical care, and court-ordered support payments. You must also provide estimates of how much you spend each month on things like food, clothing, and education expenses for minor children.
The Night Before: Look for Help
If your financial situation is simple, you may not need any assistance with the filing process. However, if you run into any snags, it’s imperative to know where to go for help. Visit LawHelp.org or search the Internet for legal aid organizations in your area, most of which offer legal advice both by phone and in person. Although seeking assistance may put a dent in your one-day plan, filing an accurate petition is much more important than speed.
7 a.m. — Credit Counseling
U.S. bankruptcy laws require all filers to undergo 90 minutes of credit counseling and receive a certificate of completion. Luckily, many courses are available online and over the phone. You can complete the entire process within two hours. The price varies depending on the provider, but in general, the class should cost no more than $50. You can receive a waiver of the course fee if your income is below the poverty line in your state. You can find approved credit counseling providers on the U.S. Courts website.
9 a.m. — Completing the Petition
The bankruptcy petition consists of a multitude of forms, called “schedules,” to record your debts, income, expenses, and assets. You can download the bankruptcy petition paperwork from the U.S. Courts website, under the “Official Forms, Instructions, and Committee Notes” heading. The list may seem daunting, but the Courts website provides an index of the forms you need to file each type of bankruptcy. Give yourself at least five hours to compete the petition; more if you need to take breaks to stretch, eat, fish toys out of the toilet, etc.
Officially known as the “Statement of Current Monthly Income and Means Test Calculation,” this is the first form you should download and complete. This form walks you through calculations to determine if your income requires you to file Chapter 7 or Chapter 13. If your income is above the median in your state and you have at least $150 in disposable income each month, you have to file Chapter 13 bankruptcy and create a repayment plan for your debts. If it falls below the median income, you must file Chapter 7 bankruptcy and surrender any non-exempt assets.
Use the documentation you gathered earlier to give a complete account of your average monthly income on Forms B 22A, B 6I and B 7. Do not leave anything off, even if it is a small amount or it was given as a gift. The courts will examine your finances carefully, and any dishonesty here can be cause for the judge to dismiss your case for fraud.
List creditor names, addresses, account numbers, and the amount you owe on form B 1. Describe whether the debts are secured, such as mortgages and car loans, or unsecured, such as credit cards, on Forms B 6E and B 6F. If you file Chapter 7 bankruptcy and have secured debts, you must fill out Form B 8 and declare your intention to either keep the property serving as collateral for the debt and continue paying, or surrender the property and be free of the debt.
Your average monthly expenses go on Forms B 22A and B 6J. As with the other forms, be thorough. Leaving off a valid expense could place you over the Chapter 7 threshold or cause you to make higher payments in a Chapter 13 payment plan.
If you file Chapter 7 bankruptcy, you must list your assets on Forms B 6B and B6C. This includes real estate, vehicles, jewelry, electronics, collectibles, fire arms, cash, and funds in bank accounts. The document requires a description of the property, as well as the current value. If you don’t know the exact value of an item, look in the newspaper, in online classified ads, and on web auction websites for the cost of items similar to yours and estimate from there. The court will perform its own valuation if it seizes the property for creditors or thinks your figure is incorrect. Most of the time, the value of your property will not exceed the exemption threshold in your state, so it’s unlikely that you will have to give anything up. You can check the exact exemption amounts by visiting your state’s bankruptcy court website.
Chapter 13 Payment Plan
If you file Chapter 13 bankruptcy, you must come up with a three- to five-year plan to use your disposable monthly income to repay your debt. There is no official form, so if your state’s bankruptcy court website doesn’t provide one, you must create the plan in a word processing program. Bankruptcy laws require you to pay off priority debts first, or at least bring them current. These include non-dischargeable debts such as taxes and child support, as well as secured debts. Once you pay those, the plan requires you to pay as much of your unsecured debt as possible each month until the end of the plan term. The court discharges any unsecured debt remaining at the end of this time, and you will no longer be responsible for paying it.
2 p.m. — Filing the Petition
Filers without legal representation must submit the completed petition and the credit counseling certification in person to the court clerk and pay the appropriate fees by cash or money order. To file Chapter 7, you must pay a filing fee of $299. The Chapter 13 filing fee is $279. If you cannot pay the entire fee up front, the court will accept installment payments. People with income that is less than 150% of the federal poverty guidelines can receive a complete waiver of the Chapter 7 filing fee. There is no waiver available for Chapter 13 filers. The clerk will give you a document to prove that you filed.
3 p.m. — Mission Complete
Once the paperwork is in, the filing process is complete. You are under the full protection of the automatic stay, so you can fax or mail copies of the document to your creditors, who are then legally required to cease all collection activities immediately.