Before diving deep into the sea of bankruptcy, you need to understand that;
Perhaps filing bankruptcy does whip up many stressful or gloomy emotions, but that doesn’t mean the end of the world; it could even be favorable for you.
To a person or a business drenching in debt, bankruptcy can be a lifeline; it allows them to come to terms with creditors and commence a new start. With bankruptcy, creditors can collect the debts they may anyway write off. Choosing to go through the procedure of bankruptcy is a very personal decision. It’s not an easy way to get out of what you owe, but oftentimes, it’s a fast and relatively effortless approach. The term “Bankruptcy” is well-known to almost everyone, yet there is a lot of chaos about what exactly bankruptcy means. In fact, you are here, because you want to know more about it; what say? Insightful! It is wise of you to decide for this; i am gonna cover everything about bankruptcy. So let’s begin…
A few carryouts
- Bankruptcy is a lawful proceeding that allows people or businesses to be released from the debts meanwhile providing creditors an possibility for repayment
- Bankruptcy allows a fresh start; however, it’ll remain on the credit reports for a few years, sometimes making it tough to borrow in the future.
- Though not all types of debts can be resolved through bankruptcy, it still helps people who have gotten over their heads financially figure out a plan to get away.
What is bankruptcy?
An option designed for a fresh start, bankruptcy allows you to form a court-approved plan to pay off or obliterate debts when they get to be overwhelming. It is a legal proceeding instigated when a person or a business owner cannot repay huge debts. In simple words, declaring bankruptcy is an approach or an alternative way to handle your debts when you find them challenging to pay.
Suppose you have large debts you can’t repay, are behind in your mortgage payments, are in danger of exclusion, and are almost being harassed by bill collectors—proclaiming bankruptcy might help you there. Bankruptcy, in some instances, lessens or eliminates the debts, saves your home, and keeps those bill collectors at bay. However, it also has some heavy influences, probably the long-term damage to your credit score. That makes it essential to know all of it!
Let's debunk the myths first!
There is so much misinformation related to bankruptcy that many people do not even consider filing in the first place. The fear of bankruptcy holds many people, and the myths make them feel more unnerved. Not really; a few of these myths are hyped mainly by the debt collectors who want to overlook bankruptcy– to protect their very interests! Truth be told, filing bankruptcy for debt relief is an important decision; you owe it to yourself and your family to establish that decision based on the facts. Below are the hyped mythologies you must not really be mindful of;
Everyone will find out if I file for bankruptcy; yikes
Not really! Nobody will find out unless you tell them. In fact, you probably have friends, co-workers, and even family members who might have filed for bankruptcy debt relief without letting anyone know, including you!
If I file for bankruptcy, the bankruptcy court will take all my belongings
No… Ne’er! Laws provide for generous exemptions that allow you to keep your home, car(s), and other important personal belongings; you don’t lose anything when you file bankruptcy for debt relief.
I'll never have a credit card or eligible for a mortgage ever again if I file an bankruptcy
Complete fabrication! One of the most widespread but untrue myths. You’ll definitely get credit card offers within a few months after filing for bankruptcy debt relief, no matter what! Also, getting loans within one year after filing for bankruptcy debt relief is no big deal!
The debt collectors can choose not to accept your bankruptcy filing
Some creditors often suggest that bankruptcy debt relief cannot really make their debts go away, but that is exactly not the case here! A plain lie! No creditor has the legal authority to stop you from filing for bankruptcy. Lawfully it is your right!
Filing bankruptcy ravages your credit for life
Though you’ll indeed have to rebuild your credit after bankruptcy, it will be considerably easier to make a fresh start with a clean financial slate. So in the long term, bankruptcy debt relief actually improves your credit over a long time as it eliminates your debts.
Types of Bankruptcies; you must know
Even though the general purpose of bankruptcy is to clear debt, not all bankruptcies are the same. There are three common types of bankruptcy, which are classified into three kinds (chapters). Let’s have a glance:
Bankruptcy: Chapter 7
Also quoted as “liquidation,” this bankruptcy “Chapter 7” forgives most unsecured debts and is the fastest and most common type of bankruptcy. This helps consumers with primarily unsecured debts like; medical bills, credit card debt, or personal loans.
- To qualify for Chapter 7 bankruptcy, you must pass the evaluation test that estimates whether your income is below certain limits.
- A person who didn’t carry Chapter 7 discharge in the past eight years is the right fit for this type of bankruptcy filing.
Bankruptcy: Chapter 13
Also quoted as “wage earners” bankruptcy, which restructures debts into a settlement plan over three to five years. For this type of bankruptcy, the eligible person must have a regular income.
- There should not be any filed bankruptcy petitions (Chapter 13 in the past two years or Chapter 7 in the past four years, specifically).
- The person filing for this type of bankruptcy must be current on tax filings too.
Bankruptcy: Chapter 11
Also quoted as “reorganization” bankruptcy, this chapter is generally used in the corporate world. Business owners who fail to run their business but want to keep operating after loss opt for this type of bankruptcy.
Other than these significant bankruptcy chapters, there are a few different types too;
Chapter 11: For individuals and businesses with exceptionally high debt. The debtor typically proposes a reorganized debt repayment plan that allows the business to keep operating and repaypay creditors over an extended time-period.
Chapter 12: Designed for the family who chooses agriculture as a living liek, farmers and fishers go for this type to restructure their finances to propose an installment plan for repayment.
Chapter 15: This one is the latest chapter added to the bankruptcy list, which primarily encourages cooperation between a foreign court or debtor and the United States courts.
The bankruptcy process can be daunting, but it exists for a reason! People fear filing for bankruptcy because they don’t want others to know they are struggling; this keeps them stuck in their financial mess, which is not fine! Hire a qualified bankruptcy attorney who can guide you more accurately and help with a successful filing. And please write to us if you want to have more information related to bankruptcy—would love to hear from your side!