Experts say what to do before, during and after filing for bankruptcy

Personal bankruptcy filings have fallen dramatically since the start of the coronavirus pandemic, experts say, but with rising interest rates and waning government bailouts, the number of filings is likely to grow. this year, experts said.

“I’ve had more calls in the past few weeks than in the previous six months,” said Charles Juntikka, a New York-based bankruptcy attorney.

Bankruptcy attorney David Leibowitz, who heads Chicago-based Lakelaw, said his firm “has seen filings in the Chicago area increase by about 25% over the past two months.”

The variety of government stimulus programs, enhanced tax credits, and protections against evictions and loan foreclosures introduced over the past two years have reduced the number of bankruptcy filing.

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However, community lockdowns and the general breakdown of Covid could also be a factor, Juntikka suggested. “It’s hard for people to come to terms with the fact that they need to apply,” he said. “It takes emotional energy, and they feel guilty about it.

“For every person I help, there are four or five miserable people.”

Bankruptcy may seem like rock bottom to financially strapped Americans, but it’s also a fresh start and an opportunity to get out of a loss that seems to only get deeper and deeper for many.

It is not an easy process. Bankruptcy records remain on your credit history for 10 years and make getting a loan or mortgage difficult.

“If you can pay off your debts outside of bankruptcy, then you should,” said Leibowitz, a past chair of the consumer bankruptcy committee at the American Bankruptcy Institute. “However, if your wages have been cut, your car has been foreclosed on, and you are in arrears by the authorities, then bankruptcy may be required.”

If you’ve decided bankruptcy is your best option, your first decision should be whether to hire an attorney to help you through the process. You can apply to the court on your own, but the cost of making mistakes is very high.

Which chapter of the code should you submit? What forms do you need to complete? What mistakes must you avoid? Bankruptcy laws are complex, and while you can save money filing yourself, you could lose more than that.

“People don’t do their own dental work,” says Juntikka. “You need to consult an attorney.”


The bankruptcy process involves a series of steps and procedures that must be followed. The type of bankruptcy you choose will depend on your circumstances.

Chapter 7 bankruptcy filings, which make up the majority of individual filings, can eventually release most, though not all, of personal debts. Housing, tax debt and student loans are among the debts that may remain for the petitioner. Most of your assets can be foreclosed and sold, although there are some exemptions, such as retirement account balances.

To qualify for Chapter 7, you must pass a vehicle test. Essentially, your income must be less than the median income for the state where you’re applying. Otherwise, you must file under Chapter 13 of the code.

In that situation, some unsecured debt can be forgiven and you can keep some personal assets, but it essentially creates a repayment plan, usually over a period of 5 years. .

Here are the individual steps you need to take when filing for bankruptcy:

  • Gather the documents you will need, including tax returns, salary statements, bank statements, brokerage and retirement account statements, real estate appraisals and other properties you own, registration vehicle and any other documents relating to debts you owe or property you own.
  • All bankruptcy filers must complete a credit counseling course both before and after filing. Fees are usually less than $50 and can be waived if you are unable to pay.
  • Fill out and print the appropriate bankruptcy forms, receive your filing fee ($338 for a chapter 7 filing in federal court), file these forms in court, and send the required documents to your designated bankruptcy trustee.
  • Attend a meeting – possibly online – of creditors with your trustee. This happens about a month after your case is filed.

All of these steps are necessary, and having an attorney can help make sure you don’t make a mistake.

What not to do

The biggest mistake people make when filing for bankruptcy is trying to fool the system. All of your assets can be seized in a bankruptcy and failure to disclose all of them can result in criminal charges.

Just ask tennis player Boris Becker, who is currently considering jail time in the UK for hiding property. Do not transfer assets to family or friends before you submit your application. It will be swiped back.

Honest debtors will get a fresh start, while dishonest ones can go to jail.

David Leibowitz

the head of Lakelaw

Also don’t max out your credit resources before you apply. The court will not kindly consider it. Never use money from a retirement account to pay off debt.

“Truth and transparency are crucial to the bankruptcy process,” says Leibowitz. “Honesty debtors get a fresh start, while dishonest ones can go to jail.”

What to do after bankruptcy?

Declaring bankruptcy can feel like ultimate failure, but there’s still life after bankruptcy. Leibowitz advises clients to take the following steps to get their lives back in order:

  1. Set a budget that you can stick to.
  2. Open a savings account and save up a month’s worth of income to provide a financial cushion for unexpected expenses.
  3. Get a secured credit card and only use it for expenses you can pay at the end of the month.
  4. Pay your rent and bills on time.
  5. Check your credit report regularly to make sure no bankruptcy debt is still outstanding on your record.

If you follow a disciplined plan, you can quickly improve your credit record and even qualify for a mortgage with the Federal Housing Administration in as little as three years.

“There is a stigma associated with bankruptcy,” says Leibowitz. “But the idea of ​​restoration and forgiveness is enshrined in our constitution.

“Bankruptcy can give people a second chance.”

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