Filing for bankruptcy can seem like a daunting and confusing task. Bankruptcy can arise from a variety of reasons including divorce, loss of job, or other situations that may or may not be controllable. Filing for bankruptcy is a very serious matter and should not be taken lightly, but for some, it may be the first step to the rest of their life, not the end.
When the topic of filing for bankruptcy comes up, one of the first things to do is to think of any and all other alternatives to bankruptcy you may have. If unsure, seek help from others you know and who can inform you of your options.
If filing for bankruptcy is determined to be the best option, then make sure to find out all the information you can before filing so nothing is a surprise. Bankruptcy is handled by local courts but it is a federal case. Be careful to file things correctly because if there is a mistake, you could be rejected and have to wait up to six months before you can try again. Just make sure to check everything and know all the fine print.
The bankruptcy forms themselves must be read in full and all details realized. One must make sure to understand fully the type of bankruptcy being filed.
Although bankruptcy may appear to have no benefits, there are a few. First of all, it allows one some sense of aid in their debt and provides a chance to begin anew. A “stay” is issued once the bankruptcy is filed, which means the person cannot be solicited for collections from those they owe and other things that may hurt the person financially.
Of course, with the good there must also be bad. The process makes a lot of a person’s private financial information able to be seen. It stays on one’s personal credit history for up to ten years and can be seen by potential lenders and employers.
There are two types of personal bankruptcy, chapter 7 and chapter 13. Chapter 7 is meant to completely remove the debt and allow an individual to start over again. It intends to make any assets that are not essential to one’s survival into means of repayment. Also, anything that is decided to be kept can be investigated by the court as potential liquidation items and assets.
Chapter 13 bankruptcy is more to get one’s finances back into working order than start all over again. The court acts as a mediator between the person filing and those they owe and makes a plan for the person to repay all or most of what they owe, as total payment is not always essential. This makes one have to stick to a plan to pay the money owed. This method of bankruptcy can protect one’s house from foreclosure.
Another type of bankruptcy, chapter 11, is not for personal finances and bankruptcy, but for business bankruptcy. This allows the business to re-organize or plan to close completely. The business gets protection from lawsuits and other negative proceedings, but many of their chief business decisions are often checked by the bankruptcy court.
By Lauren Culliton