We associate the word “bankruptcy” with dread and loss, and would fight to avoid declaring it, but the lawful function of this word is far from it. Many people believe bankruptcy is filed by companies, governments, and organizations that have failed, and is not something to be filed by individuals. In truth, there exists laws for personal bankruptcy to protect people who are struggling with crippling debt. If your finances are beyond your control you need to start taking steps to rectify your financial problems.
Gather your financial information and analyze it
You need to compile and organize all your finance-related documents to see how much money you are earning versus what you are spending and what you currently owe. Do you have several creditors? Are you constantly being contacted by collectors? Is your credit card bill going up faster than you are paying it? You need to make a tally of all the assets you have such as bank accounts, bonds and stocks, retirement funds, real estate, and anything you have of value. Once you have this, compare it to all the debts you owe, and any interest you may accumulate in the future. If your debts and liabilities are higher than your total assets, you may have to consider filing for bankruptcy because you would be considered “insolvent”.
Filing for Bankruptcy
As soon as you believe you need to file for bankruptcy, you can do so right away on your own volition. However, there are times when your creditors may also ask you to file. Bankruptcy laws vary depending on state therefore it is more advantageous to contact a Debt & bankruptcy lawyer to help with your case. A bankruptcy lawyer will look at your personal situation and help you navigate through the process while abiding by your state’s laws. In general, most people end up filing a Chapter 7 or Chapter 13 type of bankruptcy.
Bankruptcy under Chapter 7
This type of bankruptcy is pretty simple. Should you receive approval for this type of claim, your assets are liquidated and are used to pay off as much of the debt as possible. Basically, whatever valuable assets you have are sold and the money is used to pay off your creditors. This type of bankruptcy frightens most people because they end up losing most of their assets, however a lot of people are able to rebuild their lives from this point and aren’t held back by their debt anymore.
Bankruptcy under Chapter 13
Filing bankruptcy under chapter 13 allows people to keep most of their assets but is a bit more complicated to file. Individuals who have a consistent income are allowed to pay off their debts over the course of three to five years. This type of bankruptcy is more suitable for people who have business, properties, and other important assets they want to keep and protect. Creditors are not allowed to harass and contact the debtor once a judge approved this bankruptcy claim. In turn, the debtor must work and pay off the debts during the period allotted to them.
Filing for bankruptcy isn’t as scary as it sounds. To be able to negotiate the best terms for your bankruptcy and figure out which type of claim is better in your situation, you may want to consider hiring a specialized bankruptcy attorney to guide you through this ordeal. Ignoring the situation won’t help it, but taking it head-on will allow you to find a way to clear this problem and live with less anxiety and more ease. Be free of stressful debt and protect what you truly care about!