- 1). Determine who is filing for bankruptcy -- you as an individual or your business in its business capacity. Depending on your status, you may only qualify for specific forms of bankruptcy. Only businesses may reorganize under Chapter 11, for example. Individuals can choose Chapter 7 or 13.
- 2). Calculate your debt and check the current debt restrictions. In addition to status requirements, you must meet certain debt restrictions. Individuals with more than $336,900 in unsecured debt cannot file for Chapter 13 (as of 2010). Contact the local bankruptcy court for the most current debt restrictions and compare the restrictions to your debt.
- 3). Analyze your ultimate objective with the bankruptcy. Under Chapter 7, for instance, the goal is to liquidate your assets to satisfy your debts. You may not be able to protect your car, for instance, but the proceeds from the sale of these assets could discharge certain debts so you no longer need to make payments. Under Chapter 13, the goal is to formulate a repayment plan that repays your debts over the next three to five years.
- 4). Weigh your current financial situation against your goals. If you are working and do not want to liquidate your assets, Chapter 13 may be a better alternative. According to the Nolo website, under Chapter 13, you can even include missed mortgage payments as part of the repayment plan and thereby work toward keeping your house. If you simply need a fresh start and you are not working, Chapter 7 may be the better alternative.
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