What is bankruptcy? All about declaring bankruptcy
When your personal or business debts have skyrocketed and you cannot find a way out, bankruptcy can help you. What is bankruptcy? It is a term that we all have encountered on various media channels. The media is always quick to announce the celebrity who is about to lose their home, owing to bad debts. The way they paint it is enough to scare off any thought that you might have of declaring bankruptcy. It is a process that gives companies and individuals an opportunity to pay their debts under the court’s protection.
Are you eligible to file for bankruptcy?
While announcing that you are bankrupt is bound to ruin your image and your creditworthiness, sometimes it is necessary. When do you declare bankruptcy? It is important to conduct an assessment of your current financial situation to establish whether you are a candidate for bankruptcy or not.
You should think about the following questions: do you make minimum payments or miss payments for your credit cards? Are the debt collectors hounding you with endless calls? Do you pay for necessities using your credit card? Have you lost count of the number of debts you owe? Have you been thinking of consolidating your debts lately? If you answered ‘yes’ to almost every one of the aforementioned questions, you need to strongly consider filing for bankruptcy. A general way of establishing whether you need to walk this route is to assess whether you owe lenders more than you will be able to pay back.
Filing for bankruptcy
Once you have assessed your financial status and determined that the only way you will get out of the problem is through bankruptcy, it is time to file for the case. What is filing for bankruptcy? It simply means making an application to the court, after which they will decide whether your case is valid or not. If valid, you are given a verdict that will depend on the bankruptcy type that you filed for.
Actually, you can declare bankruptcy in two ways - Chapter 7 and Chapter 13 bankruptcy. Both have different eligibility requirements and outcomes. The one you choose will depend on your financial condition and personal preferences. However, unless you are a law expert, it is best if you engage the services of a qualified attorney who will advise you on the best plan to take.
The main two options for declaring bankruptcy
There are multiple reasons why people file for Chapter 7 bankruptcy. The common ones include huge medical debts, overextended credit, unemployment and marital issues. In this plan, your assets are liquidated to pay off the creditors. A third party, known as a trustee, is appointed by the court and given the mandate of ensuring that you sell off the assets and take the money to him. After you forward the money to them, they distribute it to your creditors based on the Chapter 7 bankruptcy payment plan. The beauty of declaring bankruptcy using this option is that it takes a shorter time, after which you can start all over again. Precisely, after four months you will have a discharge.
If you have assets you would want to keep, this is not a good option. In addition, where you cannot pay for the debts within the strict time set for the petitioners of Chapter 7 bankruptcy, consider an alternative plan.
If you have properties that you feel you cannot afford to lose or liquidate, file for bankruptcy under Chapter 13. You are also allowed to pay your debts within 3 to 5 years. Most importantly, you will maintain possession of your assets. However, it takes a longer to settle, meaning it can prevent you from investing.
Now you understand the basics of bankruptcy as well as what is filing bankruptcy. With that information, you can easily choose how you want to file for bankruptcy.
My name is Craig R. Chlarson. Whether you are seeking to eliminate your debt, typically through a chapter 7 filing, or whether you are seeking to reorganize your debt, typically through a chapter 13 filing, or even if you have basic bankruptcy questions, call me today. I can help you.
To schedule an appointment, call (435) 901-3449
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