Steps You Should Take Before Filing Any Chapter of Bankruptcy

1. Get Your Free Credit Report

This is incredibly important.  All creditors are required to be notified of your bankruptcy filing.  By law you are entitled to one free credit report a year from each of the major credit bureaus, Equifax, Experian, and TransUnion. 

Once you pull each credit report sit down and make a master list of each creditor and the amount owed, as well as their phone number and address which are often listed on your credit report.

Make sure you bring your reports and your list of creditors with you to your attorney for your initial meeting. Not only will this ensure that all creditors have been notificed of your bankruptcy but also will help your attorney determine which bankruptcy chapter you are eligible to file under.

From a larger perspective, this practice may also help you understand how you got into so much debt.  Did you run up credit card debt going out to dinner or on vacaction? Are your car or mortgage payments too high when compared to your monthly net income? It is just as important to learn how you got where you are so your second chance at having a balanced financial life will be different.

2. Know Where Your Finances Are

Certainly before starting fresh, you should know what got you into a bad situation in the first place.  A judge may ask you this very question when you go to court, and almost certainly you need to assess how you got in this situation in the first place so you don't find yourself under a mountain of credit card and other debt after you file.  The only thing worse than filing for bankruptcy once is filing twice.

Take a detailed look back so you can look forward in your financial life. SIt down and figure out what your monthly payments are by category and by creditor. For example, do you have hundreds of dollars in credit card debt from stores. Do you have too many cars or are your car payments too high. It is very important to understand that you are going to need to change your lifestyle in order to gain and retain control of your finances and, just as importantly, rebuild your credit history and increase your FICO score after the bankruptcy.

It may be incredibly difficult to face this problem. Don't feel like you're alone, there are millions upon millions of people in the United States who are in the same situation.  Credit card companies are marketing machines, they send out billions of credit card offers annually and extend trillions of dollards in credit, often to those who are ill-equipped to afford it.  It is true that you should take responsibility for your situation, but it is equally true that you are not alone in the battle against debt.

3. Get Your Credit Counseling Certificate Now

One of the pre-filing requirements under law for those who file bankruptcy is to go through credit counseling.  This actually makes a lot of sense for several reasons.

First and foremost, government approved credit counselors will help you determine if bankruptcy is indeed an appropriate choice to reduce your debt. There may still be other options available to you that will help you regain control and manage your debt on an ongoing basis. These options include negotiating lower interest rates with creditors, getting a second part time job to help reduce bills, and more.  Credit counselors can be of great help in helping you determine if you should file for bankruptcy.

Secondly, credit counselors will help you learn to budget and plan for the future. If you are a candidate for bankruptcy, these agencies can help you learn to live within your means and not get into trouble with credit card and other debt after bankruptcy.

Thirdly, as mentioned above, this is a requirement for bankruptcy.  If you have alread determined that you are going to file, get into a program immediately. If you procrastinate not having your certificate can delay the completion of your case. After all, don't you want to get started on your new financial life immediately?

4. Find an Attorney Who Specializes in Bankruptcy

Attorneys, like doctors, come in many forms and specialties. A lawyer who specializes in divorce shouldn't be your first choice as a bankruptcy attorney.  Do research and find a local attorney who will represent you. Gather a list of questions, such as how many filings he has handled, which, if any chapters he or she specializes in, how successful they are at having debt dismissed, and how long an average case takes them from beginning to end.

The last thing you want to do is have someone who is not an expert handling your bankruptcy case.

5. Notify All Creditors of Your Bankruptcy FIling

There are several reasons to make sure you notify all creditors of your status.

As mentioned above, legally all creditors must be notified of a filing in order for each debt to be dismissed under a Chapter 7 filing or restructured under a Chapter 11 or 13 filing.  If they are not notified you may well end up still owing thousands in debt after the bankruptcy filing.

Secondly, and perhaps most important to you, you can immediately stop those harrassing phone calls from creditors. Once a consumer or business has filed for protection collections must stop. Creditors must take all action through the courts as soon as you file. This means that they can no longer call you at work or at home and cannot send you any more letters demanding payment. 

When you are called by creditors or collection agencies after filing for bankruptcy, inform them that you have filed. Also give them your attorney's name and contact information and case number if you have it. They may also request the name of the district or county you have filed in, if you don't know this your lawyer can provide it to you and you, in turn should provide it to the creditors.

If, after informing each creditor or collection agency, they continue to call this is illegal and you should immediately notify your attorney and let him or her handle the creditor from there.