Knowing The Law – What Are The Steps To Declaring Bankruptcy?

Insolvency law, necessarily involves a consideration of the position and concerns of the debtor, the creditors and the general community. Insolvency law must seek to balance the interests of these parties and there is a need for balance because insolvency necessarily involves a limited amount of money to be divided among those seeking repayment of their debts.

Step 1: Understand the purposes of the law of bankruptcy

The first step to filing for bankruptcy is to understand the aims of bankruptcy law. Ultimately, the law seeks to provide an equal, fair and orderly procedure in handling the affairs of an insolvent person or entity and that the assets of the debtor are shared equally amongst the creditors. The system also favours a situation where the estate is administered with as little delay and expense as possible and that the administration of the estate is conducted in a fair and independent manner. The objective of the legal system is also to try to provide solutions to debt problems before the person or entity’s position becomes hopeless with no capacity to regain solvency without a substantial loss of funds to the community.

Step 2: Try To Understand If Your Situation Is Suitable For Bankruptcy Filing

Once you have understood the reasons and purposes of the law of bankruptcy you can then consider if it is appropriate in your circumstances. Naturally, there is no substitute for the advice of a competent attorney qualified to give advice on this area of law after they have taken detailed instructions from you about the nature of your circumstances. However, you can get an idea of whether you may need to file for bankruptcy based on whether you are able to pay your debts as and when they fall due and payable. If you mortgage is behind on repayments by 6 months, the landlord is threatening litigation to recover rent from you or your credit card is overdrawn by $10,000.00 and you have no savings, this is certainly a sign that you need to start thinking about the possibility that you are insolvent.

Step 3: Assemble necessary information

If you have determined on the basis of profession advice received from an attorney that you should file for bankruptcy there is a variety of information that you need to assemble. Firstly, you will need your identifying documents and you will also need to ensure that you are have the correct documents for the type of bankruptcy which you are filing. For instance, there are a different set of forms for filing chapter 7 bankruptcy when compared to filing chapter 10 which are the two main forms of consumer bankruptcy. If you are a small business filing for bankruptcy, you will need a different set of forms which are necessary for corporate bankruptcy.

Step 4: File Documents

Once you have the necessary forms and documents available, you can file them with the bankruptcy court. There are many bankruptcy courts around the country. It it necessary to remember that as bankruptcy is largely a matter of federal jurisdiction, it is a federal district court that will most likely be the court to hear your case. There is also a large amount of self help information available from the court system which you can draw on to improve your application.

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