It is never any fun to find yourself in a situation where debt is pulling you down into the dark abyss of bad credit or threatening to take you there. But luckily there are perfectly legal and accessible options in place to save you from complete credit obliteration. The great thing is that it’s not as scary as it seems and that both individuals and businesses can use the bankruptcy lifeline if they need.
What is bankruptcy and who can file?
Bankruptcy is the legal process of discharging or erasing specific debts or gaining the ability to repay them over time under the protection of the court. It will eliminate calls and correspondence from not-so-nice and always annoying creditors. Legally declaring bankruptcy also allows you to move on with your life nearly debt-free or completely debt-free depending on your unique circumstances.
If your income is not enough to cover your debts or the debts of your business, you can file for bankruptcy. Not only are the necessary funds available to eliminate the debt, there is also no foreseeable increase in income in the near future to help cover the payment of the debt.
When should I file for bankruptcy?
Making the decision to file for bankruptcy should not be made lightly. Although it will do a lot to free you from overwhelming debt, there are some conditions that it comes with. You don’t want to only look at the numbers to see if it will successfully clear away your debt. If you’ve already tried budgeting and you’re not seeing results, or if you’re already working with a credit counselor or financial advisor and you’re still not making much headway, you may be a good candidate for filing bankruptcy.
If you think that you are a good candidate for bankruptcy, you should consult a financial advisor first. You may be surprised to learn that most financial advisors and accountants see bankruptcy as a last ditch effort that should be avoided if at all possible. It is not advised that you go through this process without the help of experienced attorneys. Check with Steinbergerlaw.com for more information on how to have a smoother bankruptcy proceeding.
Since there is never a right time to file for bankruptcy, there are a few things to consider. If when you calculate and budget your earnings, debts and cost of living and you determine that it will take you more than 5 years to discharge your debt, you may want to consider filing. If you’ve already tried debt management or debt resolution and you are still in the deep end of the debt pool it may be time to think about filing bankruptcy.
What are the consequences of filing bankruptcy?
The effects of filing for bankruptcy are long lasting and will impact many different areas of your financial life. Declaring bankruptcy will significantly lower your credit rating and may make finding employment, renting a home or a car, and getting insurance more difficult. While bankruptcy can put off a repossession, a foreclosure, wage garnishment and other unpleasant actions taken by creditors against you, there is definitely a price to pay.
The good news is that the second chance you are given can allow you to create and nourish better spending habits, enhance your financial decision making skills and more. It will give you the space to start putting your financial life back on track with a clean slate.
How do I file for bankruptcy?
Filing for bankruptcy is not as simple as going to the courthouse and telling the judge that you are broke and can’t afford to pay off your debts, it is a long and often confusing process that will almost surely require some experienced guidance from an attorney to maneuver through successfully.
You’ll first need to list all of your debts, income, assets and expenses and then seek credit counseling from an approved provider at least 180 days, that’s six months, before you can actually file. There is no skipping this step, because the courts want to feel like you have gone through every possible option and that bankruptcy is your last resort.
Now that the counseling is complete you can file with your petition for bankruptcy. You don’t have to hire legal counsel to help you with this, but it is better to have a skilled attorney on your side so that you can have the best possible outcome. Once your case has been accepted, your case is assigned to a court trustee and a meeting is scheduled for you and your creditors. Your creditors will be given the chance to ask questions about your case.
What kind of bankruptcy should I declare?
There are many different types of bankruptcy. Perhaps you’ve already heard of the two more common filings, Chapter 7 and Chapter 13. Chapter 7 bankruptcy is the most common, and it releases you from the responsibility of paying your debts. It allows you to exempt certain things from being used to pay off your debts, like your home, one vehicle, pensions, veteran’s benefits and other essentials, but it means the court can sell off other valuables, like stamp/coin collections, a second home or vehicle and stock investments to settle a portion of your debts.
Chapter 13 bankruptcy allows you to repay some of your debts and have others forgiven. People who choose this option usually do so because of a high income or they are not willing to give up their property. If your debts exceed a specified amount, you may not be eligible for Chapter 13 filing.
There is also Chapter 9, Chapter 11, Chapter 12 and Chapter 15. Chapter 15 is for those who have assets and debts in the United States and in another country. Chapter 9 is for cities and towns. Chapter 11 or reorganization bankruptcy is usually for businesses. It allows them to stay open while restructuring debts and assets in an attempt to pay off existing debts. With all of the options available, it helps to have a knowledgeable person in your corner.
Although bankruptcy cannot absolve you of all your financial responsibilities, it can lift a weight from your shoulders. Debts like federal student loans, child support, alimony and taxes are not dischargeable. If you’re considering filing for bankruptcy, don’t do it alone. Consult with someone who can help you make informed decisions about your financial future.