Many Americans are thinking about filing bankruptcy but since the laws changed in 2005, you had better be prepared. In most states, you are required to go through Pre-Bankruptcy Counseling before you file your bankruptcy and then evidence that you have completed your debtor education before your bankruptcy can be completed. This counseling must be given by approved educators and a bankruptcy attorney can tell you where to get the approved list.

This counseling session should include a review of your personal financial situation, discussion of other options as an alternative to bankruptcy, and finally either tools to help you setup a budget or setting up a personal budget. The session should last between 60 and 90 minutes and can take place in person, over the phone or even online. If you are not able to pay for the session, the organization is required to give the session free of charge for those who cannot pay. Generally, the fee for this session is about $50.00 but will depend on where you live, the type of service you will receive and other factors.

If you get this session from an approved organization, you will get a certificate as proof. Without that certificate you will not be able to file your bankruptcy because of the new law. These organizations are not allowed to charge an extra fee for the certificate.

Once you have filed your bankruptcy, you will need to complete a debtor education course by an approved provider. This course will help you learn how to develop a budget, then learning how to manage your money. Additionally, you will be given some tools on how to use your credit wisely along with other resources. Normally, this session is about two hours in length. The cost for the session is generally between $50 and $100. This fee can also be waived if you are unable to pay for this session. You will also need to get the approved certificate so that your bankruptcy can be completed and your debts either discharged or organized for repayment.

Talk with a professional about what options are available to you. This will protect you and get you started down the right path. You can also go to www.ftc.gov and review your rights.

Now if you have spoke with a professional, followed that advice and have begun to prepare for bankruptcy, there are additional things that you should do. By gathering the paperwork and preparing to hand that over to your attorney, you are ready to continue on your path.

You need to begin to save some money so that you can pay for the bankruptcy. They are not free after all and the typical bankruptcy will cost you around $1500. You can save for this money by several methods. Here are a few suggestions.

1. Talk with your Attorney about which debts are likely to be discharged. Since they are going to be discharged you can stop paying those debts that will be erased in bankruptcy. If you are planning on giving up your home or automobile then you can consider those amounts as well. But talk with your attorney first about which debts you can stop paying.

2. Hopefully, you have already tried to correct your financial problems by managing your finances. If you have cut all of your extra expenses and are managing your budget well, then maybe you can have a garage sale. Cleaning out your clutter will help you with more than one problem, especially if you are planning on giving up your home.

3. Get some additional income at least temporarily by getting a second job or your spouse getting a job. It may be difficult if you have children but a little additional income can help you find the funds for the bankruptcy.

4. If you have a tax refund coming, then you can put that towards the bankruptcy.

5. You can ask for a gift from your family or friends. This may be difficult unless you have been completely honest to your friends and family because they may not know of your financial situation.

Be aware that if you have money in a bank that you owe money, you may want to move that to a bank that you don’t owe any money. Some banks will freeze the account and try to cover their losses when you file bankruptcy. 

Stop using your credit cards because you know that this is money you are not going to be paying back, it won’t look like fraud. By making any large purchases or using your credit cards prior to bankruptcy you make be accused of fraud and this could affect your bankruptcy. Again, talk with your attorney if you have any questions prior to doing anything.

Talk with your attorney if you plan to pay off any personal loans or transfer title on any properties that you have. Even if you are trying to do the right thing, you could be accused of committing fraud and then it might cause problems with your bankruptcy.

Finally, you will be required to complete a credit-counseling course. Talk with your attorney and see if you have a specific course outline that must be followed, then complete that course. It will be required before you can complete your bankruptcy so talk with your attorney and get that completed.

Bankruptcy should never be anything but your last option in correcting a financial problem. Although it might solve your current financial situation, you may not have learned your lesson. Learning what caused you to get into this position is the only thing that helps you in the long run. Do not repeat your mistake or you will end up here again. You will have to report if you have ever filed bankruptcy on many application and if lenders see that you have filed more than once, then you are likely to be denied no matter your credit at that point. Lenders can forgive a single bankruptcy because we all make mistakes. But if they see that you keep repeating your habits and have filed more than one bankruptcy then some lenders are likely to deny you based on that information.

There are many things that you will need to do if you have to file bankruptcy. It is really important that you prepare properly for this complex legal issue. This article will be broken up into a few parts so that you can have information to help you prepare.

The first and probably most important thing that you need to do is to know the process. Educate yourself about the process. Read everything that you can get, contact a professional and speak with them about the process. Once you have a good idea and a beginning understanding of bankruptcy then you can begin to prepare. Remember that the laws changed in 2005 and if you have filed bankruptcy before, then you don’t know what the new laws are and how those changes can affect you.

If you have not searched out alternatives to bankruptcy, then you have started down the wrong path. Bankruptcy should be the last alternative not the first. Try to resolve the financial problem before you decide that bankruptcy is the answer. In speaking with a professional, take the time to explain your situation and then listen to the advice that you are paying for. The bankruptcy attorney will be able to process your information, listen to your personal situation then give you alternatives or solutions to the problem. This may or may not include bankruptcy. Take the time to analyze the situation and listen to the advice you have been given.

If you are deciding to continue further with the bankruptcy procedure. Then you need to begin preparing for the bankruptcy. There are many things that you will need to do. The first thing that you should do is to prepare your paperwork. The paperwork will be necessary for your bankruptcy attorney. Make sure that you have multiple copies of everything that you take to the attorney.

Here is a list of paperwork recommended:

1. 6 months worth of pay stubs. Go back to your employers (or even previous employers) to get any pay stubs that you don’t have. If you don’t do it, then I recommend that you keep at least one year worth of pay stubs. You can then compare your stubs to the W2 that you get when filing your taxes.

2. Tax returns for the last two years. Keeping more than that is recommended but you will need to show the last two years for the bankruptcy.

3. Your current bills and statements. Included in this is any letter or statements that you have received regarding any collection accounts that you have out there. Basically this is bills or statements from ANY money that you owe.

4. Bank account and Savings account statements. You will need at least the last couple of months but providing a few more will help your attorney prepare the documentation for court.

5. If you have any retirement accounts (both IRA and 401(k)s) get the statement information to provide to your bankruptcy attorney.

6. Any legal documentation you have. Even if you think it may not be important, show your attorney any legal documentation you have. Divorce decrements, court orders, judgments, and new lawsuits may be important for you and for your attorney. Your bankruptcy attorney will advise you what documentation is important and what is not important to your bankruptcy.

7. If you are buying and making payments on your home and/or automobiles, you will need to bring the contracts for those loans with you. The attorney will discuss with you about those contracts and determine with you if you want to reaffirm on those loans. Reaffirm means that you do not want to include them in the bankruptcy and want to reaffirm the commitment on those loans.

8. If you own any other real estate, you will need to bring all the documentation pertaining to those properties. Things like the deed, home appraisals, tax assessments are important in a bankruptcy.

9. If you have filed a bankruptcy in the past, then you will need that documentation as well.

10. Finally, you will need to bring proof of your identity. Driver’s License, Social Security Card and a copy of your Birth Certificate will be helpful.

Once you have all of your paperwork gathered up, make multiple copies of that documentation. There are going to be many hands looking at that documentation and it may be passed from person to person. It only takes one mistake for you to be missing an important piece of documentation. Having copies for you is critical to having a successful outcome. No one wants to file bankruptcy but sometimes you are not given any alternatives. Be sure that you hire a professional. Investigate your attorney and talk with them prior to hiring them for bankruptcy. Feeling secure about your attorney will help you to get stabilized before, during and after filing bankruptcy.