Are You Thinking of Declaring Bankruptcy?
Mounting bills, calls from creditors at home and at work, feeling like you can never get ahead – being in debt is not a pleasant experience. Declaring bankruptcy may seem like an easy option to rid debt, but it is far easier said than done. However if you take the time to research your options, you might be able to avoid declaring bankruptcy or be prepared to handle all the intricacies and pitfalls of the filing.
1. Assess your situation
Sit down and leave all distractions behind, because it’s time to take an honest look at your finances. Regardless of what bankruptcy chapter you might declare, the court requires an inventory of your debts, assets and income. As frightening as it sounds to take a full and realistic look at your situation, do not forget to add any stocks, student loans, medical or credit card bills and mortgage payments.
Before you submit the paperwork to declare bankruptcy try a few alternative options such as: talking with creditors, selling what you don’t need or minimizing spending habits. Approaching your creditors with a payment plan may work in reaching a settlement. This will still affect your credit score but not nearly as significantly as declaring bankruptcy. Additionally, parting with objects or downsizing to a smaller living place isn’t ideal, but it might assist with catching up on bills and possibly starting an emergency fund for the future.
2. Figure out which Chapter of bankruptcy you should file.
If option number 1 isn’t really an option, then it’s time to figure out what chapter of bankruptcy to declare. The most common option for most individuals is filing Chapter 7 bankruptcy. Chapter 7 liquidates all of the debtor’s property to pay for unsecured debt such as credit cards or medical bills, however mortgage payments, car payments and student loans usually will not be dissolved. If you have a steady income and do not want to liquidate your assets, Chapter 13 bankruptcy might be right for you. Chapter 13 allows the debtor to establish a 5-year re-payment plan with their creditors that is overseen by the court. The ability to restructure debt on and individual level is similar to the advantages of filing Chapter 11 for a business. Chapter 11 is mostly designated for businesses to re-organize and make a plan to pay their debts while still keeping the doors open. Of course, there are numerous regulations and steps towards achieving an agreement and plan with creditors, but depending on your needs Chapter, 7, 11 and 13 are the ones to familiarize yourself with.
Making a tough decision about your financial future can be difficult, but if you prepare with the steps above, you will be armed with knowledge for negotiating with your creditors or meeting with an attorney. Don’t forget to apply the same thoroughness and research towards finding an excellent attorney on your journey. There are numerous websites offering forms to do-it-yourself, but legal assistance will provide the best information and outcome when declaring bankruptcy.
