Online Bankruptcy

If bankruptcy is in your future, there are tools online to help you navigate the maze. However, filing for bankruptcy is far more involved than ordering a two-topping special from Domino’s.

Parts of the bankruptcy process – meeting with creditors and pleading your case in court hearings – must be done in person. However, a great deal of the paperwork and educational requirements can be done online with help from a bankruptcy attorney or a non-attorney bankruptcy petition preparer.

Here’s a guide on how to file for bankruptcy, detailing which steps can be completed online and which steps must be done in person.

Can You File for Bankruptcy Online?

Yes, you can file for bankruptcy online in the United States. However, certain parts still require in-person attendance due to legal or procedural requirements. Here are the key aspects that typically must be done in person:

• Meeting of Creditors (341 Meeting): The 341 meeting is mandatory and must be attended by the debtor, typically in person. This meeting allows the bankruptcy trustee and creditors to ask questions about your financial situation, assets, debts, and bankruptcy petition.
• Debtor Identification: At the 341 meeting, you’ll need to provide photo identification (like a driver’s license or passport) and proof of your Social Security number. This helps verify your identity.
• Court Hearings (if applicable): Depending on the complexity of your case, there may be additional court hearings you will need to attend. For example, if a creditor or trustee objects to your bankruptcy or if there are disputes over exemptions, a court hearing could be necessary.
• Property Surrender or Asset Liquidation (Chapter 7): If you file for Chapter 7 bankruptcy, you may need to meet with the trustee in person to hand over non-exempt assets, which will be sold to repay creditors.
• Debtor’s Signature on Documents: While many bankruptcy forms and documents can be filed online, some courts may still require your physical signature on certain documents. An attorney can usually handle this process if you’re represented, or you may need to visit the courthouse to sign specific papers.

Many courts have adopted remote options for meetings and hearings, including virtual meetings for the 341 creditor meetings and court hearings. However, it’s essential to check with your local bankruptcy court about their specific requirements, as in-person attendance may still be mandatory in some cases.

Types of Online Bankruptcy

Bankruptcy filings in the U.S. significantly increased in 2023, rising by 13% compared to the previous year. Business bankruptcies, in particular, rose by nearly 30%. This marks a reversal after more than a decade of declining numbers, a trend likely driven by post-pandemic economic challenges and inflation.

There are two major forms of bankruptcy for individuals: Chapter 7, known as liquidation bankruptcy, and Chapter 13, known as the wage earner’s plan.

Chapter 7 bankruptcy accounted for 66% of total filings in 2023, continuing its dominance as the most common form of personal bankruptcy in the U.S.

This type of bankruptcy allows individuals to liquidate their non-exempt assets to discharge most debts. An individual asks the bankruptcy court to wipe out unsecured debts like credit cards, medical bills, and personal loans. A court trustee pays off as many creditors as possible by selling off non-essential property, which means anything that has value but you don’t need to get by. Common examples of non-essential property are jewelry, art, stamp collection, second house/car, and fur coat.

Chapter 13 bankruptcy is a repayment plan that acts like a debt consolidation loan. You are asked to develop a repayment plan that takes care of all or most of your debts. The repayment plan typically lasts 3-5 years, and your assets are protected from foreclosure and repossession while you repay them. Legal advice could be helpful when choosing the most suitable form of bankruptcy, but nothing prevents you from starting the process “pro se,” which means “on one’s own behalf.”

Should I File Chapter 7 or Chapter 13 Bankruptcy?

To be clear, the question is not just which type of bankruptcy is appropriate to your situation. It’s whether bankruptcy is the right move for you – period.

It’s a complicated process, and you should consider speaking to a credit counselor to determine if there’s another way to deal with your debt. Nonprofit consumer credit counseling organizations receive more favorable terms from creditors, and a debt management plan, debt consolidation loan, or debt settlement could be a better solution. You can review your options for free by speaking to a credit counselor.

If bankruptcy is your best course of action, InCharge offers bankruptcy court-approved bankruptcy education courses through PersonalFinanceEducation.com.

How to Find Help Online When Filing Bankruptcy

You can download bankruptcy forms for free at http://www.uscourts.gov/forms/bankruptcy-forms. Then the fun begins. Here is a seven-step rundown of bases you must cover.

1. Make Sure You Are Eligible

There are qualifying standards that must be met before you can file for either Chapter 7 or Chapter 13 bankruptcy and it makes sense to do research to see what form of bankruptcy you are eligible for.

To be eligible for Chapter 7 bankruptcy, an individual must pass a “means test” that determines whether their income is at or below the state median. If not, they may have to file additional paperwork or switch to Chapter 13 bankruptcy.

To be eligible for Chapter 13 bankruptcy, an individual’s unsecured debt must be less than $419,275 and secured debts of less than $1,257,850.

2. Take the Means Test

This is a form that measures an individual’s income, expenses, and household size to determine whether they can afford their debts. It compares your average monthly income against the median income of similar households in your state. If your income is below that average, you automatically qualify.

If your income is above the state average, there are other formulas incorporated into the bankruptcy means test, but they are complicated and will probably require getting some legal advice before proceeding.

Before even bothering with the means test, however, review your financial history and research the “median income” for your state. Also, you are not allowed to file for Chapter 7 bankruptcy if it’s been fewer than eight years since you went through Chapter 7. If you went through a Chapter 13 bankruptcy, you must wait at least six years before filing for a Chapter 7.

3. Receive Credit Counseling

You must enroll in bankruptcy credit counseling from an approved agency like InCharge Debt Solutions and complete the course within six months of filing for bankruptcy. The court requires you to have a certificate showing you’ve passed the course before it will allow you to file for bankruptcy.

4. Fill Out Bankruptcy Forms

The first form is a Voluntary Petition, Form B101. Other forms will require information on your creditors, contracts, expenditures and specify any debt repayment plans you have negotiated. You can find these forms on the U.S. Courts website.

5. File a Petition

This will get your case on the court schedule and stop creditors from pursuing action against you. With Chapter 7, the court will appoint a trustee to meet with you and sell your non-exempt property. Any property deemed necessary (home, car, clothing, work-related property, pensions) will be safe, though your house can be foreclosed on and your car repossessed if you miss loan payments.

6. Attend a “341” Creditors’ Meeting

The creditors’ meeting, called a 341 meeting, is where the bankruptcy trustee appointed to your case will ask you questions under oath about your financial situation. Specifically, the trustee will verify your identity, ask about the accuracy of your bankruptcy petition and schedules and give you the chance to reveal any changes that have taken place since you filed your documents.

Creditors are allowed to ask questions about your financial situation, but this rarely happens. In most cases, the meeting will take less than 10 minutes.

7. Attend a Financial Management Course

The list of approved debt education courses is available on the Department of Justice website. InCharge Debt Solutions is an approved agency with our own online bankruptcy course. The course must be completed within 45 days of meeting with your trustee and creditors.

Lieberman said anyone considering bankruptcy should take the important first step of using an internet search engine to find the bankruptcy court for their area. Each site has a plethora of information for consumers and filers.

8. Attend Court Hearings

Attending bankruptcy court hearings typically requires in-person attendance because these proceedings involve direct communication with the judge, trustee, creditors, and attorneys. The in-person presence allows for a more direct presentation of evidence, ensures that all parties can ask questions or raise concerns, and facilitates the resolution of any legal issues on the spot. In-person hearings also ensure that the bankruptcy process is conducted transparently and efficiently, as judges may need to assess the credibility of witnesses or the debtor through personal interaction.

However, in certain situations, courts may allow remote participation through video or teleconferencing, especially if approved by the court, or if special circumstances, such as health concerns or geographic distance, make in-person attendance difficult.

Do I Need a Lawyer to File Bankruptcy?

You are not legally required to hire a lawyer to file for bankruptcy, but having one is highly recommended due to the complexity of the process and the potential consequences.

Bankruptcy involves a series of legal steps, including filling out detailed paperwork, attending hearings, and meeting specific deadlines. If you make a mistake in any part of the process, such as missing a deadline or incorrectly listing assets and debts, it could result in your case being dismissed or losing property that could have been protected. A lawyer familiar with bankruptcy laws can guide you through these complexities, ensuring the process goes smoothly.

“Bankruptcy is federal law,” Lieberman said. “But every jurisdiction has local rules, and all the rules are different. If a motion needs to be filed, that motion may be different in Ohio than it is in Kentucky.”

The general rule of thumb: The simpler the bankruptcy case, the less the need for an attorney. However, in any filing, an attorney could provide help and advice even in filings that seem straightforward.

“Judges will not accept not having money for a lawyer as an excuse for not hiring one,” Lieberman said. “There’s really no reason somebody should not have a lawyer unless they have the most basic Chapter 7 filing, but even that can create problems.”

You might need a lawyer to file your case, though you can also hire a bankruptcy petition preparer. Companies offering that service will guide you through filling out forms but are prohibited from offering legal advice. Court employees and judges are also prohibited from providing legal advice. The good news is there are free legal services available through the American Bar Association and Legal Services Corporation.

Bankruptcy Attorney Fees

Hiring a bankruptcy attorney can be costly. Not hiring one, can too.

If you hire a lawyer, the average cost of filing a Chapter 7 bankruptcy ranges between $1,500 and $3,000.

For Chapter 13, the national average sits at $3,888, but you don’t usually have to pay the entire fee upfront. Instead, fees are added as part of the debt-repayment plan. However, for Chapter 13 Lieberman said many bankruptcy courts have what is called a “no-look fee,” a flat rate that everyone pays and the court does not question.

“You can find reasonably priced attorneys everywhere,” Lieberman said. “The prices are reasonable, but the more complex your case, the more experienced your lawyer the more the attorney may charge. But there’s no reason to have to pay a fortune for bankruptcy.”

He again urges all to research their local bankruptcy court website. The site for the Southern District of Ohio, for instance, has an entire section on filing without an attorney and links to find an attorney who works for free, he said.

Costs of Filing Bankruptcy

There are separate filing and administrative fees for Chapter 7 and Chapter 13 bankruptcy. You can ask the court to allow you to pay them in monthly installments or you can apply to have the fees waived.

Chapter 7 Bankruptcy Fees

The total cost for filing Chapter 7 bankruptcy is $338. A request can be made to pay the fees in installments, though they all must be paid in full within 120 days of filing. Individuals can seek a waiver on the fee if they can show their income is below 150% of the poverty line in their state and for their household size.

The fees include:

• $245 filing fee
• $78 administrative fee
• $15 trustee surcharge

Chapter 13 Bankruptcy Fees

The total cost for filing Chapter 13 bankruptcy is $313. The fees include:

• $235 filing fee
• $78 administrative fee

Hiring a petition preparer typically costs about $200, though companies often try to sell you upgraded services that will substantially raise your bill.

Online Help After Filing

You will want to keep track of notices from U.S. Bankruptcy Courts and the easiest way to do so is online. You will have to determine what computer system the bankruptcy court in your area is using. It could be the DeBN or EBN system and there could be a cost involved for using those systems.

The National Data Center is another online resource you can use to find out what creditors have filed claims against you and who is getting paid through this resource.

Online help with bankruptcy can be found at several sites.

The American Bankruptcy Institute is a nonprofit that provides research and education on bankruptcy, and shares much of that information on its website. Lieberman said its site has a wealth of information. ABI has more than 10,000 members — practitioners, judges, trustees and academics – and is nonpartisan. Commissions it has launched include advocating for system improvements, as well as ways to help veterans.

The National Consumer Law Center advocates for consumers and helps them through the maze of laws and regulations. The National Association of Chapter 13 Trustees is a primer on filing Chapter 13, and the National Association of Bankruptcy Trustees provides information on Chapter 7.

Bankruptcy Education Courses

InCharge offers bankruptcy educational courses approved by the U.S. Trustees with Bankruptcy Code-compliant certificates issued upon completion. If you file for bankruptcy, you must complete both a pre-filing bankruptcy counseling session and a pre-discharge bankruptcy counseling session.