When you file for bankrupcy, all your assets (except for those that are exempt by law) are liquidated by an official appointed by the court, called a trustee. The money resulting from the selling of your properties is then used to pay your creditors, while many of the remaining debts will be canceled.

Here’s a step-by-step guide for filing bankrupcy:

Step 1: Ponder about all your options and decide whether you should file bankruptcy

Filing bankruptcy has long-term effects and you should think about all the implications of it. If your main problem is harassment from creditors, there are other variants you should consider, such as debt consolidation and debt settlement; bankruptcy should be used only if you have some serious amounts of debts.

Step 2: Get yourself an attorney

While the law doesn’t require you to hire an attorney for your representation in court, it’s better if you do, in order to have the best decisions involving bankrupcy.

Step 3: Comply with the requirements of the bankruptcy law

File a petition to the bankrupcy court for your area. If you have any problems in dealing with these forms, ask your attorney for advise, as he should be able to help you.

Step 4: Pay the fees

There are a number of fees you must pay for filing a bankruptcies. They include the case filing fee, administration fees, trustee charges, etc.

Step 5: Wait for the notice to be sent to the creditors

After you filed bankrupcy, paid the fees and complied with the legal requirements, most collection actions against your property will have to stop actions against you. The bankruptcy clerk will sent a notice to all your creditors and the trustee will hold a meeting of all the creditors in about a month after you filed the petition.

Step 6: Cooperate with the trustee

The next step is when the trustee will liquidate all your non-exempt properties. It’s best if you cooperate with the trustee and provide him all the financial records and documents he asks.

Step 7: The discharge

If everything goes according to plan and no one objects or asks for an extension, in two or three months, the bankruptcy court will issue a discharge order which releases you from most debts and prevents any further collection actions against you. A discharge against all of your debts is your goal, and while some creditors may file an objection, in 99% of the cases, you’d be discharged of them and you get a much-needed fresh start.

1. Make sure you understand the terms.

It’s important that you understand exactly the contracts that you’re signing. Take your time and after you’re done, you should know exactly how much you’re going to pay, including what charges and taxes you have to pay.

2. Be careful when choosing the length

If you take a longer term loan, you might end up spending more on interest, even if the yearly interest is lower.

3. Check the trustworthiness of the company

If you use the services of a company to help you consolidate your debts, you should check online reviews and the Better Business Bureau ratings and complaints before signing the contract.

4. Consider debt settlement

If you’re in deep debt trouble, debt settlement might be a solution, trying to negotiate with the creditors. Sometimes, it’s costly, but if it helps you avoid bankruptcy, then it’s probably the best solution.

5. Think of whether you can refinance your mortgage

If you refinance your mortgage, you can move your high interest unsecured debt into secure debt, with a much lower interest. However, be careful to make a choice for which you can’t miss a monthly payment, so you won’t get a foreclosure.

6. Borrow money against your life insurance policy

If you have a life insurance policy, you an borrow money against it and strictly speaking, you don’t even have to return it, if you don’t want or can as it will be deducted from amount given to the beneficiaries.

7. Avoid predatory lenders

Having high-interest loans to banks is bad enough, so don’t even consider getting some loans from shady sources. Getting a high interest loan from a loan shark will just get you in more trouble.

8. Check your credit report

Before making any deal, you should know exactly how much you owe, how much interest you pay and what are the monthly payment. You wouldn’t recognize a good deal if you don’t know what you currently have.

9. Non-profit doesn’t necessarily mean good

Some debt consolidation agencies are not-for-profit companies, but you should be as careful as with any other companies: this status doesn’t mean you’d get the best deal available.

10. Do your own research

Check the offers from multiple companies and see which is better for you. Many companies offer free quotes, so you can sign up and see whether it suits you.