DIY bankruptcy or "do it yourself" bankruptcy (aka file own bankruptcy) involves you doing your own bankruptcy paperwork and filing.

Bankruptcy is a state (involving legal procedures) in which a person can no longer pay off the debts that he/she owes the creditors. Given that bankruptcy filing procedures differ from state to state, the first thing you need to know are the exact laws in your state. You will also need to know the types of bankruptcy laws that are there and which one can apply to you case. The two types are the Chapter 7 law (straight or liquidation law-mostly for credit card debts) and the Chapter 13 law (loan repayment plan for secured types of debts, taxes, mortgages, rent etc).

Getting the Ball Rolling - Paperwork, paperwork, and more paperwork

The first step in DIY bankruptcy preparation involves preparing the documents to file the bankruptcy petition. These documents are lengthy and must be filled out with the Bankruptcy division in your area, where you will be asked to pay a filing fee (around $200) which will sometimes be waived if you file a waiver and it is approved.

Once this is done the court might assign you a trustee, whose role is to oversee the liquidation of assets, review documents, and protect the rights of the creditors. But since you would like to do it yourself, then you might consider seeking the services of a paralegal to help you prepare the documents.

Even one error can be very costly and result in having to redo the paperwork. Since you are doing it yourself your property will be exempted from liquidation. Simply put you may be allowed to keep your home, a car, personal clothing and some items of household furniture.

There are schedules within the bankruptcy documents where these items may be listed along with an approximate value. Make sure that you list them when you do a do it yourself bankruptcy filing.

Make sure that your DIY bankruptcy filing offers protection for your vital assets. After the paperwork has been accepted by the court your creditors will be notified. Once all your creditors are aware of your bankruptcy filing a meeting will be held and the creditors who wish to question you may do so. You need to be prepared to answer all the questions you will be asked as part of a bankruptcy. Filing for bankruptcy is not easy especially when you do it yourself, but if you choose to make sure you get as much help as you can.

One last bit of advice: of course your creditors are not happy with you, and you may not be in the best frame of mind at the time. Have a long talk with a bankruptcy expert and know what kinds of questions to expect and what the most appropriate answers would be.

Bankruptcy is definitely not the end of the world, however if you'd like to avoid it at all cost then you should definitely check out our latest article on bankruptcy alternatives and discover the best ways to avoid it at all costs.