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All you need to know about Bankruptcy

All you need to know about Bankruptcy

Bankruptcy is a very complicated legal proceeding even though its prevalence today often gives the impression otherwise. There are commercials that tout bankruptcy as a way to get a new start and solve all their financial woes; the reality is much grimmer.

Bankruptcy may offer solutions to some financial problems, but not without its drawbacks. Before you attempt any type of bankruptcy filing, it’s important you understand what bankruptcy is and how the process works.

WHAT IS BANKRUPTCY?

Bankruptcy can be regarded as a federal legal process designed to give companies and individuals a fresh start from debt that is unmanageable. It can also be a way for companies to liquidate assets in an orderly way.

If you are in debt and considering filing for bankruptcy, you are probably brimming with anxiety. You will not just fend off collection calls but you must think about the possibility of bankruptcy which can be a confusing process, how the bankruptcy will be like and how you will even fare after you are done with the bankruptcy case. 

However, when you understand the following aspects of bankruptcy, you will be more prepared for what to expect and how you can live a life free from debt.

BANKRUPTCY IS NOT AN “IN” AND “OUT” PROCESS.

You might think that bankruptcy operates similarly to small claims court if you are inexperienced with how bankruptcy courts operate. The most common bankruptcy chapter for individuals is Chapter 7 bankruptcy. It usually lasts for about 4 to 6 months. The processes of bankruptcy chapters, 13 and 11 which is the second and third most frequently filed bankruptcy can last much longer. A chapter 13 bankruptcy plan may last for about 3 to 5 years while a chapter 11 case may last for 2 years or more.

If your aim is to obtain the coveted bankruptcy fresh start, you must be prepared to stick it out.

BANKRUPTCY OPENS YOUR FINANCES TO PUBLIC SCRUTINY

If you are the type of person that is not comfortable discussing your salary with your family and friends, with bankruptcy, you must be prepared to expose your financial status and everything to the public. You will be required to file for an extensive package of paperwork if you file for bankruptcy protection. It is called bankruptcy schedules and it is used to list your debts, income, assets, expenses, and financial transaction is done recently.

You will also be called to attend a meeting of creditors where there are bankruptcy trustees who will ask you probing questions about your finances in a public room. During the meeting, any of your creditors can question you. This can be a very embarrassing and uncomfortable process for many individuals because of how public the meeting will be. But you need to be prepared to air your financial dirty laundry.

HONESTY AND COMPLETE DISCLOSURE ARE REQUIRED

Complete and total honesty is of the utmost importance in bankruptcy. It is the position of bankruptcy courts that discharge of debt is only entitled to debtors. This means you must be able to list all of your properties, creditors, and debts. When you are discovered to lack honesty, not only will you lose the bankruptcy discharge, you may face investigation by the FBI. It is a serious federal crime to be dishonesty in bankruptcy.

BANKRUPTCY FORMS ARE COMPLICATED AND REQUIRE GREAT ATTENTION

Many people see bankruptcy as simple and straightforward because it is mostly based on forms. Unfortunately, bankruptcy forms look more like confusing tax returns than “check the box” kind of forms. The form contains complex and trick questions about your financial affairs. It is necessary you give yourself enough time in other to digest the bankruptcy forms before filling it. 

The most critical forms include statements of financial affairs. An experienced bankruptcy lawyer can help you understand the necessary information to complete the forms and to avoid situations that can cost you money, property, or even freedom.

THE BANKRUPTCY DISCHARGE IS PERSONAL

The ultimate goal of bankruptcy is discharged. It stops your creditors from attempting to collect debts from you. This means the bankruptcy discharge protects only you because it is personal but it does not eliminate the debt itself. For instance, if you are a co-signer on a home loan and you file for bankruptcy, the debt is not wiped out as the lender can still collect the debt from the other co-signer on the loan. This is an important consideration if your co-signer is a family member that is not going to file for bankruptcy.

FILING FOR BANKRUPTCY IS NOT CHEAP

Even though you are filing for bankruptcy because you may be in financial ruin, it will still cost you a significant amount of money. The amount that will cost you largely depends on whether or not you wish to hire a lawyer. Retaining a bankruptcy lawyer may cost much but if you prepare and file your own bankruptcy case, the filing fees are substantial.

HOW TO FILE FOR BANKRUPTCY

The first part of filing for bankruptcy is to ask yourself important questions like how long you will likely have to repay the debts and whether you are legitimately unable to make the necessary payment. Another important thing to consider is if you can compile the necessary documents and information.

The next step is to look for a bankruptcy lawyer. It is important to find someone who understands it better so that you can be guided through the various intricacies of filing for bankruptcy. The next step is to take credit counseling because a certificate of completion is required before debts are discharged.

After the completion of the counseling courses, the next step is to fill out the form for bankruptcy. A bankruptcy lawyer will help you determine the relevant forms that need to be filled out. The case is then given to a trustee if the petition gets accepted. The trustee will go through the documents to ensure that there is no fraud committed and all assets are accurately collected.

The next stage is that a meeting will be set up with the creditors wherein you must testify under oath. During the meeting, you will be asked questions concerning your financial status, debt, assets, and other relevant information. At this stage, you will be required to answer all questions as honestly as possible.

With all that is written, you are now pretty aware of what you should know about bankruptcy. It is not as easy as people think it is but with the proper information, you can know the right steps to take in other to make it easier for you.

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