Bankruptcy: Do it Yourself or Get Help

My wife and I just filed for bankruptcy. We filed a Chapter 7 Bankruptcy, which wipes out our debts. I know; bankruptcy is not something you’re supposed to talk about, but maybe you too have been thinking about filing. Here is what it was like for us.

Before making the decision on how to file I looked closely at three options.

Option One ‘” Partial Do It Yourself

I looked at websites where you pay a fee, then fill out their questionnaire and they send back “ready to file” papers. Their cost averaged only a couple of hundred dollars. However, you are on your own to get the papers filed and at the bankruptcy hearing also.

Option Two ‘” Full Do It Yourself

I downloaded the bankruptcy forms free from the bankruptcy court website. As I studied the forms, I realized we needed help. Although there are instructions available, we were lost in the maze of paperwork and believe me, there is a lot of it. There are at least twenty different forms that must be filled out. Once again, you are on your own to get them filled out, then filed, and also at the hearing. A mistake could cause your petition to be rejected.

Option Three ‘” Hire an Attorney

Next, we talked to a couple of lawyers and the initial consultations were free. Their fees ranged from fifteen hundred dollars to over three thousand. However, this included the filing fees and getting the credit reports. We chose this option. I felt that with a decision this big we needed expert advice and guidance. Thankfully, we had just gotten our tax refund.

The initial paperwork from the lawyer had five pages of questions, after that there was another thirty page questionnaire which turned into the final sixty page petition. That was followed by another ten page questionnaire for later, when we have to appear in bankruptcy court.

We had to inventory everything we owned. If it has value, even garage sale value, it has to be listed. After itemizing everything it all gets lumped together into the proper category on the petition.

We also had to list all our expenses and debts which required our credit report and statements from creditors. Once we got our credit report, we were surprised to find out exactly how much debt we owed. Not being the type to regularly check our report we were really only guessing at the amount. Now, we will be checking our reports at least annually, when it is free.

If you have secured debt, such as a car or house, you will have to decide if you want to keep them. If you have other contracts, such as a cell phone, or a satellite TV contract, you have to decide whether to keep them as well. Keeping them is called “debt reaffirmation”. Since we rent our home we reaffirmed only our car and cell phone contracts.

Our last step before the filing was an online debt counseling course. It is required by the bankruptcy law that you have a certificate from an approved debt counseling service before you can file the petition. Although the charges for this vary, they average about fifty dollars. This session lasted an hour, after which, we had to call to speak directly with a counselor.

In the end I’m glad we paid for an attorney’s advice and guidance. I consider it money well spent because he knew the forms, the ins and outs of bankruptcy, and most importantly, he will be there in court with us in case the judge or trustees have any questions. I’m glad we don’t have to be there alone; peace of mind has its price also.