Drowning in debt? You’re not alone. Medical expenses, credit card debt, or job loss can catch people off guard. Bankruptcy is a legal process that allows companies, in particular, to avoid paying their debts when the numbers are not in their favor. Although it can be useful in creating a new image, it is not a universal solution. However, it is essential to know some of the most important things in bankruptcy that will guide you.
What is Bankruptcy?
Bankruptcy is a legal procedure that can assist people and companies in reorganizing their debt if it is too oppressive. Filing the bankruptcy petition also eliminates some or all the existing debts and stops creditors from contacting the debtor.
This is because debts that can be discharged include medical expenses, credit card balances, car loans, personal loans, payday loans, and utility bills. However, some exceptions include student loans, taxes, and other legal fees. If you have doubts about the necessity of declaring bankruptcy, a lawyer from this law firm, for instance, can evaluate your financial position and consider other options that may suit you. An experienced lawyer can explain the various options available to you if you are considering filing for bankruptcy.
Types of Bankruptcy
There are two basic forms of bankruptcy: Chapter 7 and Chapter 13.
Chapter 7 bankruptcy, or liquidation bankruptcy, is intended for those who cannot pay off unsecured debts like credit cards or personal loans. In this process, some of your assets, such as your home or car, may be sold to the creditors, and other eligible debts are discharged, and you are relieved of them.
Those who file Chapter 13 bankruptcy or reorganization bankruptcy with a source of income wish to retain their properties while paying their creditors. This option is better because it involves repaying the loan in installments for three to five years. Thus reducing the chances of losing all the property and assets as one tries to get back on one’s feet.
Signs You May Need to File for Bankruptcy
- Non-payment of at least the minimum amount required on every monthly statement
- You have taken payday loans to cater to basic needs (food, gas) or pay bills.
- You are juggling monthly bills (some of which you can’t pay).
- You have no emergency fund or savings.
- You are on the verge of losing your house through foreclosure or repossession.
- All of your credit lines are at or near the credit limit.
How to File
Bankruptcy is never an easy affair; thus, it is wise to seek the services of a professional lawyer in this area of law. Before filing the petition in court, You must pass a mandatory credit counseling course.
After that, you will have to file a bankruptcy petition and also file schedules that will show your assets, liabilities, income, and expenses. You will have to get a trustee who will handle your case, and you will have to attend a meeting with your creditors. In Chapter 7 cases, there are no more meetings, but in Chapter 13, there may be more hearings to confirm the repayment plan.
Dealing with many debts is not easy, but filing for bankruptcy may solve the problem. Thus, by knowing your choices, the consequences of filing, and the process, you can make the best choices for your future. It is possible to rebuild your credit after bankruptcy with the help of a reliable attorney and some practical actions.
