Bankruptcy is a process of federal law that relieves individuals and business premises from their financial obligations in order for them to start anew. It is created to aid a sincere debtor to establish a new prospect without engaging in trouble with a creditor collecting their long overdue debts. Applying for a petition involving a bankruptcy case tends to be a lengthy process, but it doesn’t need to be complicated.
Declaring bankruptcy can be time-consuming and costly. It may also have an adverse effect on your credit store. This means that filing a bankruptcy case should be your last resort. Still, prolonging the wait to file it until the individual is down-and-out might work against him. If you want legal help in filing the case, you can reach out to your business attorney or the Benenati Law Firm.
Two Types of Bankruptcy
There are two of the most common types of bankruptcy that an individual usually encounters:
- Chapter 7 Bankruptcy is a type of bankruptcy that closes down all of the store’s non-exempt assets to reimburse its creditors. This is the best option for individuals with a huge amount of unbound debts like credit cards, medical bills, and a small-scale income. However, a debtor must give a mean test which will determine if he/she is eligible to file a chapter 7 bankruptcy.
- Chapter 13 Bankruptcy is a type of bankruptcy that reassembles or regulates the debt with the use of a repayment plan. This is the best option for individuals with large income who don’t want to lose any asset and needs time to chase on unsecured debts.
Should you file for Bankruptcy?
If you can still decrease the number of your debts or create a regular payment plan with the creditors, there is no need to file a bankruptcy case. Alternatives like financial coaching, negotiating with creditors, credit counseling, loan modification, and credit card consolidation can also be considered.
Bankruptcy can only come into consideration when you can’t catch up with your financial obligations for the following reasons:
- Having no employment income or savings while being out of work.
- Lax taxes
- Having a house nearing foreclosure
- Seizure of wages
- Unsettled proceedings for delinquent bills
How to file for Bankruptcy
Declaring bankruptcy is a tedious process, so an individual must know and understand the procedure for filing. The following are the steps on how to file for bankruptcy:
- Hiring a bankruptcy attorney
It is not a requirement for every individual who wants to declare bankruptcy to hire an attorney. However, for a higher rate of success, it is recommended to hire one. There are free available legal services for anyone who can’t afford to hire a bankruptcy attorney.
- Finding out the qualification for filing bankruptcy
Not all individuals can file for a chapter 7 bankruptcy. There is required level of income to determine the qualification for filing. If the requirements are not met, then a chapter 13 bankruptcy can be done to make a payment arrangement with the creditor.
- Filling up bankruptcy forms
After determining the eligibility to file bankruptcy, a bankruptcy form is given. You will have to list all of your properties, income, debt, and expenses for the court.
- Filing the bankruptcy form
Filing the bankruptcy form officially starts the case. If you hired an attorney, he or she will complete the filing of bankruptcy forms.
Declaring and filing for a bankruptcy case is a huge financial step. However, if your debts keep piling up, and you have no way to get out of it, then declaring bankruptcy might be more beneficial to you. You just have to keep in mind that when it is used improperly, you might end up in a more complicated situation.