The Ultimate Guide to Surviving Chapter 7 Bankruptcy

chapter 7 bankruptcy guide


It’s not exactly a very friendly sounding word, now is it? The good news is that bankruptcy can be overcome. I’m living proof of it. I declared chapter 7 bankruptcy in 2007 and survived, and you probably can too. It ended up being a good move for me.

Over the past few years, I’ve written quite a bit about my experience with bankruptcy.

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Chapter 7 Bankruptcy FAQ

Do I Regret Filing for Bankruptcy at Age 23?

FEBRUARY 2, 2011
It’s been over three years now since I filed for bankruptcy.

Time for some reflections.

Do I regret filing bankruptcy?

No, I don’t.

I really did not want to file bankruptcy initially. In fact, if you look back at some of my posts in mid-2007, I was very adamant about not filing.

I realized that was more about my pride than making the right choice for my family and myself.

Pride does that sometimes.

Could I have avoided filing chapter 7?

It’s possible.

If I had known that my income would dramatically rise a year or two after the point I filed, it’s possible I could have avoided filing. Or gone with a chapter 13.

The problem is that filing made it all possible for me to reset, to get a fresh start. And my income was down to next to nothing when I filed, so it was hard to see at the time a larger income stream on the horizon.

Do I recommend filing bankruptcy?

In the right situation, yes.

It’s not for everyone. The 341 Meeting is strait awkward. The whole process isn’t fun at all…but for me, it was worth it.

I’ve been telling more and more people in my life about my bankruptcy filing. I think if you can recover well from it, it doesn’t have to be this horrible thing over your life forever.

I think it’s also about how you view yourself. Yes, you screwed up, but tell me, who hasn’t? Yeah, my mistakes were bigger than most financial ones, but you know what…it’s not life or death. It really isn’t.

And I think with the way the economy is and the whole housing crisis, I think filing for bankruptcy has less of a stigma than ever.

This doesn’t mean I think it should be a first option. It should always be the last resort. But once you’re at the last option, take it and move on with your life.

What have been the consequences in the last 3 years since filing?

Since I committed to a cash-only lifestyle, the effects have been minimal.

The largest has been housing. Every housing situation I’ve found since filing, has been non-conventional. I’ve avoided management companies and rented directly from owners. That’s the only way to even have a shot at a decent apartment.

What happened to your credit score?

Well, like most people looking at filing, I was way beyond on lots of debts. So my score was already in the crapper. I think I hit 472 even before filing.

I applied for a few “rebuilding” type credit cards right after my bankruptcy and I think that was a good move. I never keep a balance on them (the limits are only $300 and $500), and they seem to have helped my credit score recover a bit (I’m above 680 now, I was below 500 post bankruptcy).

So three years later, my credit score is actually looking really good. I have no bad debt, one small federal student loan, and a few good credit lines with no-late payments. 700 FICO here I come.

Not that I will be using that score anytime soon.

I think if I wanted to buy a home at some point, I will run into issues having the bankruptcy on my record.

What happened with your student loans?

Nothing. Those aren’t dischargeable in bankruptcy.

I recently paid off all my private student loans however.

Any advice for someone thinking about bankruptcy?

Meet with 2 people:

1. a consumer credit counseling person to see if a debt management plan could help you avoid BK


2. A bankruptcy attorney. They are obviously going to push you in the filing direction, but nearly all BK attorneys will do a informational meeting free.

Also, the bankruptcy paperwork is a bear. It will take work for you to fill out all the details correctly. Don’t skimp spending time on this. Your attorney can help guide you with the paperwork, but ultimately it’s your responsibility to make sure you fill it out with all the correct details.

Lastly, ironically…the cost of filing bankruptcy isnt’cheap. Expect to pay at around $1,000 on average to have an attorney handle your bankruptcy case. Can you do it on your own? Yes, but I would never recommend it. You’ll end up shooting yourself in the foot, and the stress is not worth it.

Chapter 7 Bankruptcy: Process & Timeline

A Chapter 7 bankruptcy is a legal proceeding in federal bankruptcy court which can release you from any necessity to ever pay your debts.

In doing this, however, you do stand to lose any non-exempt assets you may have (stocks, bonds, cash in savings accounts, valuable artwork, etc) to the trustee-in-bankruptcy appointed by the court. These are ordinarily sold and distributed amongst your creditors. This includes any income tax refunds that are due to you.

Fortunately, you are permitted to retain some important assets that the court considers exempt under federal law. These include your house, your car, clothing, personal items like furniture and house ware, etc. The usual cost due to the court for filing is just under $300.00.

What the Debtor (filer) Must Do

First you and your attorney must attest to the fact that you understand that you are filing factual information and also that data being provided is warranted under existing federal law. This simply means that you understand both the state and federal laws that apply to filing under Chapter 7. The required forms under §521 and the Means Test in Official Form B22A (which determines your ability to pay certain costs) and numerous other documents are complex for any layman at law and should be handled by an attorney.

If you make too much money to file Chapter 7, you should look at filing Chapter 13 Bankruptcy.

Filing a bankruptcy has become considerably more complicated since the Bankruptcy Reform Act 0f 2005 became law. It includes, among other things, the necessity that the debtor attends one class or credit briefing before filing. Today, attorney’s fees for filing a Chapter 7 range from about $1275.00 for a simple filing to as much as $2,500.00 for complex cases. Anyone who attempts to handle his or her own bankruptcy today can reasonably be said to have had a ‘fool for an attorney.’ These filings are just too complex for a non-lawyer to handle properly.

The Chapter 7 Timeline

In most cases, you can expect to be adjudicated a bankrupt within 4-6 months from the date your action is filed in the federal bankruptcy court. While there are some important things to consider and do prior to the actual filing, your case really begins on the day you file it with the court. This is the day that the ‘automatic stay’ (temporary injunction) goes into effect. It prevents your creditors from contacting you, harassing you or dunning you for payment in any way. The next important date is approximately 20-40 days after filing. This is the 341 meeting of creditors with the court-appointed trustee.

In most cases, unless the debt is very large, your creditors will probably not even show up. You (and your attorney) must be present and be sure to bring your social security card and a photo ID. If the trustee requests any additional documents, be certain that you supply them as quickly as possible. You can expect to be discharged within 60-90 days after the meeting of creditors.

What Happens to My Secured Property?

Certain property that is secured such as your house and a financed car, boat or RV, may be repossessed by the lender and cannot be discharged in a Chapter 7 action. The thing to do here is ask each lender to accept a ‘reaffirmation’ of your debt. This means that you agree, in writing, to continue making the payments after you are adjudicated a bankrupt. Most lenders are happy to agree, since you have discharged your other obligations and cannot file bankruptcy again for seven years.

How Bankruptcy Affects Your Credit

As a general rule, it is best to consider bankruptcy as the least desirable option available to you when your finances have gotten out of control. However, if your financial situation has been going downhill for an extended period of time, your credit standing is probably so bad that filing for bankruptcy really won’t do much to make it worse, with one exception: A bankruptcy remains on your credit report for ten (10) long years. Nonetheless, creditors will know that once you file bankruptcy, you cannot do so again for 7 years.

When your finances reach the point where you consider them terminal, bankruptcy will provide relief in the sense that it will halt the never-ending dunning letters and telephone calls from creditors and collection agencies. The effect that it will have on your credit standing depends in part on which type of bankruptcy you file.

Chapter 13 Bankruptcy credit issues

Chapter 13 bankruptcy, also referred to as reorganization, does not discharge your obligations. What it does do, is permit you to ‘work out’ a plan for paying them off in amounts and timeframes that you can manage. Chapter 13 is designed to provide a solution for people who have suffered a short-term financial problem due to a job loss, sudden catastrophic illness, etc. If you still have a regular income and wish to avoid the stigma of a Chapter 7, a Chapter 13 filing can give you the time you need to correct your problem. This filing will combine an automatic ‘stay’ with three to five years to catch up on your backlog while you keep current on your ongoing monthly expenses. You will have to complete a U.S. Trustee-approved credit counseling briefing with your petition in order to have the court place a stay or hold on a foreclosure or repossessions. Your creditors will receive a notice from the court that stops their collection efforts and dunning in approximately fifteen (15) days after you file your petition.

A Chapter 13 bankruptcy will have a negative effect on your credit report, but it does show your willingness to pay your debts rather than to discharge them. That should help you obtain new credit within a year or so.

Chapter 7 Bankruptcy credit issues

From a credit standpoint, Chapter 7 bankruptcy is the blackest mark you can have on your credit standing. While it absolves you of the debts you owe (except for monies owed in child support & alimony or unpaid income taxes), it makes obtaining new loans or credit cards extremely unlikely for at least a year or two and perhaps longer. There are some exceptions. Federal student loans, for example, are not granted based upon credit history or income. In fact, federal law prohibits discriminating against applicants based upon these factors.

Getting New Consumer Credit Will Be Difficult After Either Bankruptcy

You may be able to obtain a home loan beginning two years after being discharged in Chapter 7, or as soon as one year after filing a Chapter 13. FHA and VA-insured mortgage loans can be had as early as one year after filing either bankruptcy petition. Normal consumer credit, such as revolving charge accounts or credit cards, will be much more difficult to secure, as they are determined by the credit standards of the individual lenders.

Chapter 13 Bankruptcy: Process & Timeline

A Chapter 13 bankruptcy, also referred to as ‘reorganization’, does not discharge your debts as a Chapter 7 Bankruptcy does. Instead, it provides you with an opportunity to settle amounts past due through monthly payments made over time in addition to your regular monthly payments.

Chapter 13 is normally utilized by people who have suffered a catastrophic financial event such as a sudden job loss or major family illness. It is used by both individuals and businesses and does not negatively impact credit to the degree that a Chapter 7 filing does, because it demonstrates to creditors that you are willing to pay your debts despite the problems.

What Must a Debtor (filer) Do?

Prior to filing the Chapter 13 action, you must complete a U.S. Trustee approved credit counseling briefing. Once completed, a certificate of completion must be filed with your petition. Your case really begins when your attorney files the petition in federal bankruptcy court. When a Chapter 13 action is filed, it places a ‘stay’ in effect under 11 U.S.C §§ 362 that prohibits your creditors from harassing you or attempting further collection activities. A notice of your filing will be sent to the entire list of creditors you provided within fifteen (15) days of filing.

The Chapter 13 Timeline

As previously stated, your case begins on the date your attorney files your petition with the federal courts. Approximately 15 days later, the court issues a notice of commencement of the case to all your creditors. This notifies them that the ‘stay’ is in effect and sets the date for a 341 meeting of creditors before a court-appointed trustee. It also informs your creditors of the final date for filing any complaints or objections with the court (usually 30 days). Your planned re-payment schedule must be filed within fifteen (15) days of filing unless your attorney included it with the original petition. Approximately 20-40 days later, the 341 meeting of creditors is held. In most cases, few if any will actually attend unless the amount due is extremely large. You can expect to be discharged within 60-90 days after the 341 meeting date.

What Must You Do to Qualify for a Chapter 13?

In order to qualify for filing a Chapter 13 bankruptcy, the following must be shown:

• You must have a regular income that will permit you to make the pre-determined payments to the trustee in bankruptcy who will distribute funds to your creditors.

• You have to show that you have an adequate amount of disposable income so that you can make regular payments to the trustee AFTER covering your current living expenses.

• You must also show that your disposable income falls within the pre-set limits for both secured and un-secured debts. These limits are updated occasionally and your attorney will be up to date on what they are. In May 2007, these limits were $1-million for secured debts and $337,000 for unsecured debts.

Some important Cautions…

For either Chapter 13 or Chapter 7 bankruptcies, you should be aware that any assets transferred to family members, friends or some business associates will be considered as ‘preferential’ and disallowed by the court. The court may also dismiss your petition altogether if it believes that transfers of ownership or sales of assets were done to defraud your creditors.

You also cannot file a bankruptcy petition if you had a previous petition dismissed within the past 6 months of this filing.

chapter 13 bankruptcy – my best option?

My father came to visit yesterday and we had a free meeting with a bankruptcy attorney earlier this morning.

Needless to say, it was an enlightening and interesting meeting.

I went into the meeting very, very anti filing a bankruptcy. I’ve come out of the meeting very, very unsure of what I should do.

My Questions about Bankruptcy

We went into the meeting with a one page overview of my situation and two other one page spreadsheets. I was well prepared. I had a list of specific questions I wanted to get answered and for the most part all of them got cleared up.

Some of the question I went in with:

  1. Personal & Business debt totally intermixed – a mess!
    1. Personal vs. Business bankruptcy? Is it one or two filings?
    2. Business revenue being applied to personal debt, generating more tax liability.
  2. WAMU & Wells will not negotiate a payment plan on Business Loans. WAMU has demanded payment in full on ~$30k
  3. Who can seize or take control of a Business Checking Acct. and how can that be prevented?
    1. Wells Business Checking Acct. risk?
    2. IRS back taxes, & current year taxes
    3. WAMU?
  4. Is any form of bankruptcy an option?
    1. Cost?
    2. How you get paid?
    3. Taxes on write-offs?

Chapter 13 vs Chapter 7 Bankruptcy

Due to my level of income, my situation would definitely be a chapter 13 filing. A trustee would set up a re-payment plan for up to five years based on my disposable income (in theory, my business is supposed to be paying me 40K a year).

Business vs. Personal Debts

Because all my business debts are personally guaranteed by myself, they can all fall under the personal bankruptcy. As least this is what we got from the attorney.

Taxes and Students Loans

Taxes and student loans cannot be forgiven or reduced in any manner, but it sounds like they could be rolled into be being handled by the trustee as well.

Pros of Filing (as I see them)

  1. Monthly payment would be my disposable income on 40K, so probably no more than $1.5K a month at most for everything. This is vs. the over 3K a month I have no with all the debts
  2. In 5 years everything would be gone (this does not include the money I owe my mother, since technically it is not a debt)
  3. Would allow me to separate business vs. personal expenses and start with a clean organized slate on the business side of things
  4. All debts go to 0% interest
  5. No more calls, disruption of business time, ect
  6. Other pros here I’m sure


  1. Stays on credit report for 7-10 years. My credit is already shot….but still.
  2. I would have to check those boxes on applications that ask if you’ve ever filed a bankruptcy (yes, this seems trivial…but its not to me)
  3. Other cons here that will come to me later…

Bottom Line

The bottom line is that I really need to think about this. I’ve got some big projects at work coming out in the next 3 months that could significantly change my revenue at the business.

I’ll be honest…the more I think about it, the better idea it sounds. I really need capital right now in my business to expand things…but all profits right now are going to debt payments.

I’m so confused.

Time to get back to work. At least I can do that well…

Bankruptcy Alternative: 3 Alternatives You Can Take Right Now

Bankruptcy is something that, if you are by any means able too, you should avoid at all costs.

Having gone through a bankruptcy myself, I can tell you that there is nothing fun, simple, or easy about it. It’s a mark that I will live with the rest of my life.

This guide will show you various ways to avoid Bankruptcy. Some of these options have consequences, but none as severe as bankruptcy.

I hope that as you read through this guide you will commit to taking action right now to avoid bankruptcy. There are many paths to avoiding a bankruptcy, but they all require action, and hard work on your part.

I will list the options from least impact (paying your bills on time, getting out of debt a dollar at a time) to the most impact (entering a debt management plan).

Cut Expenses, Start Paying Down Creditors

If you have a manageable level of debt you can avoid bankruptcy. What is a manageable level? Most experts agree that if you have unsecured debt that is higher than your annual income, it that is not manageable. For example, let’s say I make $35,000 a year. $20,000 in credit card debt is manageable, 60,000 is not.

Depending on the extremes you are willing to venture to in avoidance of a bankruptcy, you could stretch that manageable definition a little.

If you have a manageable level of debt, your best option is to pay down your debt. There are two theories on this. One, you pay the highest interest debt down first. Two, you pay the debt with the smallest balance down first (also known as the snowball method). Mathematically, paying the highest interest debt will get you out of debt the fastest. Psychologically, many argue that the snowball method keeps you more motivated. The thought being that you stay with the debt pay down and get more and more excited (the snowball keeps building) as you pay larger and larger debts down.

If you can budget in $200/mo to pay down the principle on a credit card, or even $100, you can snowball your way out of debt.

I could write volumes on tactics and strategies for managing your expenses. But it’s quite simple: spend less than you earn. take the rest. pay the debt down.

A Debt Management Plan

If you’re monthly credit card payments are just out of reach, and you’re done everything you can to reduce expenses, a debt management plan might be your solution. When you enter a DMP, your interest rates are dramatically reduced, and all your unsecured payments are paid in a lump sum to the plan provider.

A DMP has severe consequences on your credit score, though not nearly as severe as a bankruptcy. It is not a public record, and you will not have to go to any hearings like you do with a bankruptcy.

I was in a debt management plan for a few months as I tried with all my heart to avoid bankruptcy. In my situation my debt was just too much, but I wish I had been able to pay off my plan.

When to file Bankruptcy

If you can’t do options 1 or 2…you might have to look at chapter 7 bankruptcy. It’s not the end of the world.

A local bankruptcy attorney can help you understand the differences between Chapter 7 bankruptcy and Chapter 13 bankruptcy, so that you can make an educated decision about the best next step for you.

7 Lessons I’ve Learned Post Bankruptcy

FEBRUARY 2, 2011

lessons from bankruptcy

Photo by gilbertofilho

It’s been over two years now since I filed for a Chapter 7 bankruptcy.

Two years of scrapping, recovering, learning, and often, pain.

So, what have I learned in the last two years? Plenty.

1. Bankruptcy hasn’t hindered my life dramatically

The funny thing about Bankruptcy is it dramatically kills your ability to get credit. But if you just filed a BK, the last thing you need is credit again, right? I mean, go all cash for a while. I didn’t even think about credit for a long time. I’ve since rebuilt my score quite a bit by getting some bad credit credit cards, and paying everything on time. But I still have zero credit card debt 2 years later.

For me, my bankruptcy wasn’t a “start over”, it was just a marking point. I still had over 150K in debt (to my mother and student loans that aren’t discharged in a bankruptcy). For many people, I imagine a bankruptcy is devastating. For me, it was the right move at the time, and if I had to go back two years, I’d do it again. I’d have too.

2. Owning a home doesn’t mean “you’ve made it”

In fact, most of my friend who bought homes 2-3 years ago are kicking themselves. I mean, I fell for the trap as well, but I feel many of my friends still think home ownership is the bees knees. I’m sorry, it’s just not. I can’t tell you how many people keep asking if I’m buying a home when I move, and I’m just like, “Nope, just renting”. You can almost hear their shock at how confident in my statement I am. It blows people away, even in 2010, that I don’t want to buy a home (even though I now definitely could again)

3. Cash is King

For about two years (2007-2008), I slept horribly. I was always on edge, always waiting for the shoe to drop. I’m still getting over that. The cause? No cash.

No cash in the bank means that any small event (minor accident, illness, car trouble), could turn into a major one. And that causes a ton of stress.

$5K in the bank will fix that for most people. Granted everyone’s “Sleep Better at Night” number is different, but for me it was around $5,000. Once I had that in the bank, I knew that any small bump, would be just that, and nothing catastrophic.

4. People will judge your regardless of your wealth

Rich or poor…it doesn’t matter. You’re always going to encounter people who aren’t happy that you are succeeding, or are happy that you aren’t. Haters gonna hate.

5. You have to force yourself to succeed

When you have no other option than to succeed, a funny thing can happen, you actually succeed. Two years ago, I had no choice but to succeed. I’m not quite there yet, but I’m getting darn close to being able to pay off my Mom completely, and my student loans, and be 100% debt free. For me, my bankruptcy wasn’t a “start over”, it was just a marking point. For many people, I imagine a bankruptcy is devastating. For me, it was the right move at the time,

6. You can learn from your mistakes

I think a lot of people, some of my family included, thought I wouldn’t be able to kick my trading habits. But I haven’t traded a single stock or currency (I have sold some stock holdings I had) since Jan of 2007.

Just because you screw up big time, doesn’t mean you’ll always be a screw up. You can learn learn from your mistakes!

7. Hard work WORKS

I’ve worked my rear off in the last two years. And it’s paying off. I’m closer than ever to many of my goals, I’m getting married, I’m in decent shape….but it hasn’t happened magically. I had to work to prepare myself to be in a relationship. I’ve had to work my butt off to make more money. I’m always looking for new ways to improve myself, in business, in learning, in life. And that takes hard work.

Can I get a mortgage after my Bankruptcy?

Apr 22, 2011

Well, it’s now been over three years since my chapter 7 bankruptcy was discharged.

My credit score has returned to a pretty average level: 682 on Experian

My score hasn’t really changed much in the past 18 months, I was a 664 in November of 2009. But I haven’t done much to really work on it.
could I get a mortgage with this post bankruptcy credit score?

I setup a few credit rebuilder type credit cards right after my bankruptcy, and I don’t use them, but they are active, at least 2 $500 limit cards. I think those have helped.

Since my bankruptcy I haven’t had any adverse credit issues like a late payment showing up, and little to no inquiries. So, the question remains…

Could I get approved for a mortgage?

First off, I’m not looking to buy a house this year. But it’s something that in the next year or two my wife and I might look into. My wife’s credit is like 780 or something ridiculous like that. She’s goody-goody like that.

Strikes against me: Bankruptcy, house short sale in 2007, self-employed

Positives: No bad debt, good landlord references, High income level

I know I looked into buying a home awhile back and the mortgage office I talked with seemed to think it was doable 2 years post bankruptcy and short sale. Well, by the time I might be serious it will probably be 4 years post those events.

Does anyone have experience getting a mortgage after bankruptcy and/or a foreclosure or short sale process?

How I Avoided Bankruptcy

Jul 22, 2008 – Guest Post

I’ve been reading the debt kid’s story with interest… how he came to be in as much debt as he is in and then decided bankruptcy was his only answer. I wasn’t quite as much in debt as this guy, but I thought I’d share my own personal struggle with debt – and how I avoided bankruptcy.

I put myself through four years of college at a private university (at the time I thought it was a better education than a state school, but now I realize there isn’t much difference in the real world unless we’re talking about Yale or Harvard or something!). By “putting myself” through college, I mean, I took out loan after loan, and put the difference between what the loans would pay and what I still owed on credit cards.

I graduated with close to $60,000 in school loans (about half are privately funded loans rather than federal loans), and a good $15,000 in credit card debt. Don’t ask me how I was able to keep getting approved for higher limits and more credit cards, but it wasn’t that difficult to do. I’d ask, I’d receive, I’d spend. As a college student, I prided myself in using credit cards only for college related expenses, thinking it made it “good debt” – while friends were using their credit cards and parents’ cards to charge their entertainment expenses. Either way- debt is debt and I was in trouble.

I was working full time for a government office, but my pay wasn’t anything exceptional and certainly not enough to cover living expenses and the loan payments and credit card payments. I was late on the bills simply because there wasn’t enough money to go around once all of the education loans came due; and to top it all off, I started a family just a few months after I graduated. Yes, I realize this was poor planning (or lack of planning?!) but it’s how it happened.

My expenses were increasing (new baby), but my income was decreasing (staying home with baby). I got a work-at-home position as an administrative assistant (no daycare needed), and supplemented it with writing jobs, but with $75,000 in debt and living expenses – I was still in trouble. My husband worked full time and made an average salary, but he had racked up debt and expenses from years of not really caring about whether he paid his bills or not!

We had to do something. Bankruptcy was considered and thrown out because you can’t write school loans off with a bankruptcy. Since the bulk of the debt was school loans, we didn’t think it would be very helpful in the long run to further damage our credit and file bankruptcy since we’d still have the $60,000 in school loans to deal with, and our living expenses.

My husband had a mortgage, and so he attempted to reduce his own expenses (cards in his name gotten before we got married, small loans, vehicle loan, etc) by refinancing his mortgage to include most of his other expenses. In the process, he was talked into taking the property and school taxes out of escrow for the “lower” monthly payment on the house – not understanding he’d still have to set aside $60 a week in order to have the money available for the taxes when they came due. So the consolidation of his debts with the mortgage refinance actually caused us to pay MORE per month than we had been paying previously!

Our next attempt to salvage the money situation was to use a loan from his 401K to pay off credit card debt. Having been an avid reader of personal finance blogs for several years now, I understand that 401K loans aren’t the best use of the money – but it seemed our only option. The interest we would save on paying off the credit cards with the 401K loan made it worthwhile to us to take from the retirement fund. Plus, when you repay a 401K loan, you pay interest on the money borrowed – which is also deposited into your 401K (so you basically pay yourself back with interest!). We probably lost money on the investment side of the 401K by having less in the retirement account, but I’m certain we probably gained in the long run by paying off credit cards that were at 20% interest or more!

We have sort of learned our financial lessons, although we’re still a long way from where we’d like to be. When we added to our family with our second child, I had a difficult pregnancy that put me on bedrest for awhile – reducing my income temporarily and making it difficult to keep up with the school loan payments (again). The federal loan programs allowed me to defer the loan payments for a few months, but my private education loan through Wells Fargo did not offer a deferment program or any other alternative payment method for this difficult time, and charged my loan off when it was 91 days late as per the contract I signed when I was 19 years old. This of course, further damaged my credit, and the only way to get this loan out of collections is to either pay it in full (about $24,000 right now, after the company added close to $8,000 in fees and such immediately before charge-off), or make payments for years until it’s paid off – but during which time Wells Fargo will not update my credit report to reflect the payment status and so my credit score will not improve by making payments.

We rarely use credit cards, but when we do we pay them off within a month or two of using them. I think the point I’d like people to take from this post, is that even when you think bankruptcy is the only answer- reconsider. If you have retirement, a way to consolidate, or a family member willing to help you get your act back together again, you will probably be better of using these alternative resources rather than filing bankruptcy.

How To File For Bankruptcy Without Losing Your Mind

FEBRUARY 2, 2011

don't lose your mind filing bankruptcyFiling for bankruptcy sucks. It’s time consuming, stressful, and overwhelming all at the same time.

When I filed my bankruptcy three years ago, I learned a number of lessons I will share here.

First off, don’t try to file bankruptcy by yourself. Even with a lawyer, it’s a daunting process. I can’t imagine trying to do it on your own. You’ll pay $1,000+ but they are worth every penny. (even the federal court recommends it saying, “hiring a competent attorney is strongly recommended.”

With that disclaimer, here’s what to do to prepare to file:

1. Get organized

You are going to have to provide exact numbers, including account number and balances for every debt you want discharged in your bankruptcy petition.

So start a folder of all your latest credit card bills, medical bills, mortgage, etc. Keep the latest bill in that folder. It will come in handy later.

2. Make copies of everything

Make copies of all your latest bills, and any of the latest collection agency documents you’ve been (most likely) receiving.

3. Be 100% honest with your lawyer

“Be completely honest with your attorney. Usually, if you are completely honest, all of your property will be protected,” said Angela Low a bankruptcy lawyer in Seattle.

Look, you aren’t the first person to file bankruptcy. And your lawyer I’m sure has dealt with more complicated and convoluted cases than yours.

Always be 100% honest with your attorney.

They will help you, and I know you might feel ashamed, but you need to accept that they won’t judge you, and are there to help.

Don’t hide any documents they ask for. Don’t forget to call them back. Don’t forget to email them back. Keep in as close of communication as you can to keep your petition moving forward.

4. Work on your petition form every day

Your lawyer will give you a giant form that you need to fill out so they can start your paperwork. It will be a TON of questions.

Work on the form each day. Just answer a few of the questions a day, gather the documents needed and keep working on it.

Your lawyer will not be able to file your paperwork (bankruptcy petition) without you helping them.

Filing for bankruptcy is not a magical process. It takes work.

5. Reaffirm your vehicle*

*unless you are very upside down

You’ll want to probably keep at least one vehicle. Make sure that you tell your lawyer this! There is a separate attachment to your petition that must be filed if you intend to keep paying a debt such as a car loan (Debtors statement of intention).

6. Exhale

It’s going to be ok. Your 341 meeting will be fine if you follow these steps.

And once your bankruptcy is discharged, you’ll feel a sense of relief you probably haven’t felt in ages.

7. Advice from an expert attorney

Bankruptcy attorney Angela Low also recommends,

“Find and attorney that you are comfortable with and that will make time for you.”


“Take notes during your meeting with the attorney. There will be a lot of information given to you, and if you do not take notes you may not remember later.”

lastly on paperwork,

“Read and keep copies of what the court mails to you. It will have important information with regards to the court house address, and what you need to bring with you to the court hearing. Too often, people skip though the details and show up at the wrong place, and forget to bring proof of ID and their social security card or W2 form.

If you follow these tips, filing for bankruptcy can be a little less stressful. Good luck!

More Resources:

Links: US Federal Bankruptcy Court Resources

The Difference Between Chapter 7 and Chapter 13 Bankruptcy

May 5, 2011

When I filed for Bankruptcy in 2007, the main question was: Chapter 7 or Chapter 13.

The majority of individuals end up filing Chapter 7. Why? Well, it’s cleaner than a 13, and most individuals don’t have enough income to qualify for Chapter 13.

Ultimately, the judge can decide which number you file. If you have substantial assets and/or income and try to file a Chapter 7, when you could support a Chapter 13, the judge can change your filing to a Chapter 13.

In a Chapter 13 bankruptcy filing, court-ordered payments are setup to payoff some of your creditors over a set period of time. Chapter 13 filings account for about 30% of all individual bankruptcies.

In a Chapter 7 bankruptcy all debts are discharged (except student loans, child support, taxes, and a few other special circumstances). The large majority, 70%, of personal bankruptcies are Chapter 7′s.

I still feel strange about filing Bankruptcy. It’s been over three years now since mine was discharged, and still only my family knows that it ever happened. I’ve never told any friends of mind about it. It’s strange how little we talk about money and how difficult it is to know the real financial situation of people just by observation.

In the end I’m glad I filed Chapter 7. I would never have been able to afford payments post filing, and I no assets that I needed to keep. It worked out well in the end.

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  • concerned4future

    Hi and thank you for your input on your website. I had to file bankruptcy about 7 years ago due to divorce and the pile of debt we had together. It wasn’t easy the first couple of years, but I now have my own credit which rates about 670 now.

    However, my husband and I bought a home (it’s in his name only) 6 yrs ago through Washington Mutual(now Chase Home Loans). I lost my job and he experienced huge pay cuts through the state. We tried to work with the bank every step of the way, but, ended up being directed by the bank to fill out paperwork for a short sale. It seemed all was going okay and they were going to accept it. But, just yesterday, they said they wouldn’t go with the short sale unless we pay $5000 for closing costs (which we don’t have), pay $120,000 over ten yrs…or face foreclosure.
    Wow, Chase Home Loans has really taken us for a ride, lied to us, and strung us along for over 2 yrs and now this. Now, my husband will have to file bankrupcy, which is really horrible.

  • john varasteh

    chapter 7 california central district santa ana
    my brother snd i bought a house together. my bk was dismissed. he filled under the same chapter requesting suto stay on real property we own together
    does aut stay apply to more than one individual, or does chapter 7 apply to my brother asking for stay on the same real property

  • Dave

    Cannot seem to get to any of your bankruptcy cost blog pages, have they fallen off the site?

  • Dave

    filed my BK in 07/13/2010 only requested to keep my home and 2 tow trucks, not one creditor showed at any of the (3) dated set by BK court here3 in SB county, calif . it was discharged as of 12/2/2010 however; mortage co. sold my home at auction on 08/20/2010 mind that my BK was still active! I want to no how to go about taking said lender to court for violation of BK laws as well as all the added stress and undue hardship incured thus far..i no its not legal just not sure what exact laws were broken and if i should get an attorney!!!!

  • Jay

    Thank you for such great information. I have been forced to file for bankruptcy because I am an unemployeed disable vet. The information you have given is making this process a lot easier for me.

  • http://home peggy

    We are in debt so bad I feel horrible and find no escape. To poor to hire a lawyer. My hubby just drinks to not think of it. His alcoholisum leads us to this.

  • Gabby C.


    My husband and I are in the process of filing Chapter 7 right now. We have had a pretty miserable last few years financially and as much as we were trying to avoid it, we had no choice but to file Chpt 7. Yes it is pretty expensive to file, but we have faith in our attorney and to tell you the truth are kind of happy that we are doing it. Yes, it is going to be a rough next few years but we are ready to face it head on. We have places to live and income coming in, so we are ready to settle in and ride the ride. :) I just want to say to anyone having to face this, remember this is only temporary and if you are really in a financial rut and it is ruining your life, would you rather face a lifetime of misery or 7 to 10 years of getting your life back together? That is how I look at it. :) Best of luck to everyone facing this right now! We will all pull through this together! :)

  • Greta

    I filled for chapter 7 back in it was discharged in 2005. I am currently in the process of refinancing my mortgage but they needed an affirmation of with my current mortgage lender. I don’t have this but reading some questions above I should have done one during the process of my bankruptcy. What is the best options for me to get my refinancing moving?

  • Mike

    Question: I recently filed for Chapter 7 bankruptcy. I filed before getting married. My wife has pretty good credit. Never late on any payments. We are hoping to purchase a home (and keep the townhouse we currently live in as an investment property). We aren’t looking for a significant mortgage. We in fact did the math on the amount we are looking for and the monthly payments would be a little less than our current monthly mortgage payments.
    My wife approached a lender about qualifying for a mortgage and said she couldn’t qualify based on her income alone. She would need to show 30% equity in the townhome first. Can a mortgage lender consider my income in the equation or am I completely locked out of the transaction? I make around 95k and she 60k. My income would certainly help the situation if it could be factored in. If it can’t be factored in…how long will we have to wait before it can???

  • Glenn

    I am in the middle of a chapter 7 in NH. I have mechanical bills for my truck. Can I withdraw from my 401k to pay these bills without it effecting my case?

  • Mr. Leahy

    I filed for bankruptcy last year. Can I have a title for a boat transferred into my name this year ? I also went through foreclosure as well and lost my home. If I transfer the boat into my name, can the bank go after this asset ?

  • http://[email protected] Karen

    Are you kidding me??? You overspend, live beyond your means, and all the while you are well -aware of all of this. But you don’t care. So….. Hey…. Just declare chapter 7, walk away with all the goodies we can, and let the hard working taxpayers of the United States eat it. Screw you. Your horrific. Chapter 7!should make people accountable for BAD FINANCIAL JUDGEMENT. Why the hell do they think they deserve any excuse??? THIS HAS HOT TO STOP AND NOW.


    This excusing all of this irresponsibility is a disgrace.

  • http://[email protected] Karen

    Every person I kno in my state filed chapter 7 not for lack of luck or job loss. Just greed full overspending, entitlement and no though about how to pay for it. Let them pay for it now…. I don’t want to give the the free outdoor of bankruptcy. That simply abuses all financially responsible, TAXPAYING WORKERS,,, HEAR ME TAX PAYINGNWORKERS WHICH YOU ARE NOT!!’

  • Christina

    Karen- learn how to spell crack fingers. Every person in your state? Gosh…you must know a lot of people. You sound strung out and angry, sorry you cannot go bankrupt on dope.


    I can’t believe the ignorance of some people. Yes, we are aware that a lot of people use bankruptcy to just spend spend spend and then drop it off on the doorstep of a lawyer. Most people, however, live in areas where pay scales are just terribly low, come from families with no money to help them. Some of us are doing everything we can to stay ahead of our bills, but health, and circumstance cause us the inability to keep ahead of bills. To be clear, i have , for the area, a well paying job, insurnace, and the whole nine yards. Not one penny we have is from another taxpayer, nothing. Unfortunately i have been plagued by health problems and have over 20,000.00 in debt (after insurance). I am sure i am not the only one who wishes they could just stay ahead of it all and not have to file. Karen—you obviously don’t realize that 2/3 of this country is filled with people like me, work hard, can’t get ahead. We just don’t have money to cover extra health bills in addition to paying regular bills. None of which includes any credit cards, we only have 1 car, and rent a home, not OWN one. Until you face the fact that the way this government and society is set up…you have to have money to make money, then shut UP,,,,,,,,,p.s food and gas has gotten so expensive some of us aren’t sure how we’re getting to work next week.

  • Kim

    You also have to consider what havoc the last 4-5 years have done to families: people have lost jobs and not been able to find jobs-and even if you have been able to hang onto your job, people have had wages slashed or no raises at all for 5 years-all the while watching the cost of gas, heat, food, health insurance, electricity rise….it’s become almost impossible to stay afloat even if you HAVE a job. And then should disaster strike and you need a new heater/roof/sewer pipe, you are totally wiped out.

  • debtgirl

    Kim you got it! It is like you keep peddling as fast as you can only to go no where fast!
    There is a reason that the laws are in place for debt relief. I don’t thinking being angry and judging is helpful. Most people seeking BK are doing it at their wits end. Looking for a new start after some very tuff lessons learned.

    Chapter 13 is paying back what you can!

  • Dan

    What everyone so far fails to mention is their age, I am 53, and seeking a chap 7, if I don’t get it then I will be paying on a chapter 13 for 5 years with any kind of added income completely controlled by the courts/trustee. Not the way I planned on living when I reached my fifties!
    I am going through the process of filling out the paper work now and what a hassle.

  • Charles

    I filed bankruptcy, have a major medical condition that I had surgery for a while ago and no one wanted to insure me anymore. You just never know what happens to people in life. Before that I had A1 credit, no blemishes whatsoever. Medical bills. Life happens.

  • Shannan

    Right Charles.. Life happens.. I am a single parent of 2 children. Child Support is rare. I have a full time job that it a temp job that barely pays to bills. Medical bills are piling up (temp job no insurance) and life just keeps happening.. about 90K in debt and barely making 2000.00 a month? well.. Im filing.. I work hard and I do the best that I can for my kids.. SO Karen.. I dont know what your problem is, but you need to get over it quick.

  • Andrew

    Thanks for the article, I learned a lot from reading this! Its interesting that you said you rented direct from the landlord and cut out the agent and saving money in the process. How do you find out landlords need tenants without agents? Want to do this one myself!

  • Manna Capital

    You have explained really fantastic about bankruptcy. The advice you have given here which will be helpful for many people who are thinking for bankruptcy.

  • Eric Carnegie

    Guest post are welcome.