What to do in the Event of Bankruptcy
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Things do not always happen as you plan them to be. Like relationships, businesses too sometimes fail. But that’s not the end of the world. If you’re not in a position to pay off your debts, you have an option to consider filing for bankruptcy. Here are the basic information and steps you need to know about in the event of possible bankruptcy. ~ Ed.
Staying afloat in today’s financial situation is no easy task.
While starting a business has never been easier, maintaining it, and seeing ultimate success, may not be possible for even the most innovative and pioneering of ideas.
Competition from other companies, customer favoritism towards larger, chain merchandisers, staff pay rates, increasing rent prices, and meeting tax payments can all contribute towards an ultimate decline in a business’ earnings.
While this can feel despairing to be caught in a downward spiral, it’s important to remember that bankruptcy is not the end – in fact, for most people, it’s the opportunity for a new start.
What is bankruptcy?
The legal definition of bankruptcy refers to the process an individual or business must go through when they are no longer able to pay off their current debts.
You are usually classed as bankrupt if you estimate you will need at least five years to pay your debts off.
In a Chapter 7 case, a common outcome is that the court will clear your debts by ordering the selling of your assets, including your property, or will offer you a plan to pay the debts off yourself. A Chapter 13 bankruptcy will usually allow you to keep your property, and opt for a payment plan instead.
You are not legally bankrupt until you file for bankruptcy with a court. It is highly recommended that if you are significantly struggling to pay off your debts, you consider filing for bankruptcy as an option, as it can enable you to clear your debts and start afresh.
It is often the best solution for your circumstances, and you should not feel put off doing so.
6 Steps to Filing for Bankruptcy
If you are currently in the situation of bankruptcy, here are the steps you should follow to make it out on the other side:
Seek Financial Advice
It may be wise to seek legal advice before making the decision to file for bankruptcy. This is to ensure that you are definitely in a position where bankruptcy is the only reasonable outcome for your financial situation.
Normally, bankruptcy is only considered suitable when you can’t pay back your debts within a certain period of time. A legal advisor, together with your accountant, if you have one, should be able to help you make a firm decision on whether filing for bankruptcy is the right thing to do.
Make an Application for Credit Counseling
Before filing for bankruptcy, another way to ensure that it’s the right choice for you is by applying for credit counseling. This will enable you to review your finances and consider repayment options, if and when appropriate.
You will need a course completion certificate once you have completed the credit counseling to prove that you meet the requirements to file for bankruptcy. It is important that you do not miss this step out, as you will be required to show certification of your completion before your debts can be cleared.
Hire a Lawyer
Many people choose to hire a bankruptcy lawyer, who is available in all cities. Like if you live in the city of Irvine, you may avail the services of an Irvine bankruptcy lawyer to assist in your legal case.
And, unless you are highly experienced in the working of courts yourself, it is advised that you take this option. Bankruptcy lawyers have key professional knowledge of bankruptcy law and can advise you on your options, as well as ensuring that your case runs smoothly and fairly.
A lawyer can help you to take control of your situation, and you have a much higher chance of clearing your debt with them by your side.
File a Petition with a Bankruptcy Court
By this stage, you will be more than ready to file for bankruptcy, and you can start the process by filing a petition with a bankruptcy court. Make sure you have all your relevant financial documents to hand, as all of these will need to be laid out clearly before the court.
The following debts can be included in your bankruptcy application:
- Any credit card debts
- Loans taken out for personal or business use
- Shared debts (although if you do include these in your application, the other person who shares your debt will be responsible for paying it off)
- Overpayments of benefits
- Contracts or leases in your name
- Council tax debts
It is important not to miss out on any of your statements. If you are uncertain, always seek legal advice.
Complete a Debtor Education Course
While your bankruptcy is being processed, you will be expected to complete a debtor education course, which gives you tools for managing your finances once your debts have been cleared.
Once you have finished this course, you will be offered a completion certificate, which you must file for court anytime between now and before you make your last debt repayment (if this is the decided outcome).
Failing to complete the certificate may cause the court to dismiss your case before your debt is cleared, so once again, it is a necessity for this step to be undertaken.
Wait for the Outcome of Your Case
For most Chapter 7 and Chapter 13 bankruptcy cases, you can expect proceedings to span for around three months.
Once your debts have been cleared and your assets ordered for selling, or a payment plan put in place, the case will be closed.
Bankruptcy will stay on your credit report for up to ten years, and the rebuilding process is not always easy.
But once your proceedings are complete, you should see your debt-free status as a new start. It’s rare to make the same mistakes twice, and a future bankruptcy is a highly unlikely outcome.
Consider assistance from a financial planner if you need help getting back on your feet, but understand that this is a positive outcome for you. From this point on, you have a chance to reconsider your financial habits for a more positive future.
Over to You
Have you or your known ones ever filed for bankruptcy? Please share your experiences and thoughts in the comments.
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Disclaimer: Though the views expressed are of the author’s own, this article has been checked for its authenticity of information and resource links provided for a better and deeper understanding of the subject matter. However, you're suggested to make your diligent research and consult subject experts to decide what is best for you. If you spot any factual errors, spelling, or grammatical mistakes in the article, please report at [email protected]. Thanks.