Declaring you’re bankrupt may be embarrassing, but you need to do it so you can breathe better and get back on track financially. People and businesses declare bankruptcy because of various reasons. Individuals file for bankruptcy because they are no longer capable of paying back their debts. Companies go bankrupt due to fund, mismanagement or they are unable to keep up with the changing market demands. Whatever the reason individuals and businesses opt to file for bankruptcy, they must be prepared for the outcomes, whether negative or positive. Bankruptcy can be one of the many solutions you can choose to be able to get back on track when it comes to your finances.
How to Determine if You Need to File for Bankruptcy
Filing for bankruptcy must be your last resort because once the filing is done, it will affect not only your credit score but also your entire life in the long run. You may even lose some of your assets, depending on what the courts decide. You need to determine whether you’re ready to file for bankruptcy. Here are some questions you need to ask yourself:
- Do you have the qualifications to file for bankruptcy? Bankruptcy is not suitable for everyone. Requirements and criteria are imposed to prevent people who are using bankruptcy as a way to escape their creditors. You need to meet the following conditions before you file for bankruptcy:
- You have no previous debts that were forgiven through bankruptcy.
- You have a mid-range income.
- You don’t have any cases of bankruptcy in 180 days.
- Are you ready for what you are about to lose? Preparing yourself mentally for the things you’re about to let go is important when filing for bankruptcy. You might end up losing almost all of your properties and assets as a form of payment to your creditors. As a result, you may end up with close to nothing.
- Do you know which type of bankruptcy to file? Two common forms of bankruptcy are typically submitted by individuals or business. You need to determine which one is suitable for your situation:
- Chapter 7 – This type of bankruptcy liquidates your assets so the proceeds can be used as payments to your creditors. You are allowed to keep your car, your home, and the tools that help you make your trade.
- Chapter 7 – This type of bankruptcy liquidates your assets so the proceeds can be used as payments to your creditors. You are allowed to keep your car, your home, and the tools that help you make your trade.
- Chapter 13 – This bankruptcy enables you to restructure your finances, assets, and properties, so it’s easier to pay back your debts. Through this filing, you get to repay your debts while the other financial obligations are forgiven.
- Are you prepared for the consequences? Remember that filing for bankruptcy will affect your credit score, your ability to apply for a loan, and even rent a place to live. Your insurance companies might increase your monthly premiums because they can tag you as a high-risk client.
Never treat bankruptcy as an escape from your debts. Instead, you should treat it as a solution to pay back your creditors. You’re still obliged to pay back what you owe even if you file for bankruptcy. If you’re prepared to lose your properties, and you’re aware of the long-term effects of bankruptcy, you can proceed with the filing. However, if you still have any questions, you can also seek legal help. To contact a lawyer, click here.
