While bankruptcy can provide relief and a fresh start from most debts, it is also considered the "debt option of last resort".
How to File Bankruptcy
If you're reading this, you're probably contemplating filing for bankruptcy. While this is a position we're sure you never wanted to find yourself in, the good news is that declaring bankruptcy no longer carries with it the stigma it once did. In the wake of the recent economic recession, scores of individuals and corporations have turned to bankruptcy as a means to clear the slate and provide a fresh financial start.
In this article, we'll explore the different types of bankruptcies so you can determine which one is best suited to your needs, as well as what you can expect during the bankruptcy process. We'll also take a look at different ways to go about filing. So let's get started, and get you back on the path towards financial freedom today!
To review debt relief alternatives to bankruptcy in California and to get a free debt relief analysis, along with a free savings estimate, simply answer a few online questions. It's free and there's no obligation.
Which Chapter is right for you?
Bankruptcy types are known as Chapters, named for the Chapter they appear in under the United States Bankruptcy Code. The most common types for individuals are Chapter 7 and Chapter 13, while businesses tend to file for Chapter 11 Bankruptcy.
Chapter 7
Chapter 7 Bankruptcy, otherwise known as "straight" bankruptcy, is the most common type of bankruptcy filed by individuals - over 65% of all filings are under Chapter 7. When filing for Chapter 7, non-exempt property and assets are seized and liquidated by a court-appointed Bankruptcy trustee, who then uses these funds to pay back some of your owed debt to your creditors. It's important to note however that in many instances, you do get to keep your home, car, and other property, depending on your particular state's bankruptcy rules and regulations. At this point, you receive a "Discharge of Debt," meaning you no longer owe anything to your creditors, and you can start fresh.
For a review of debt relief alternatives to bankruptcy in California and to get a free debt relief analysis along with a savings estimate, simply answer a few questions online.
Chapter 13
Unlike with Chapter 7, Chapter 13 bankruptcy doesn't liquidate any of your assets. Chapter 13 is typically filed by individuals who have a steady source of income, and can afford to make monthly payments over a three-to-five year period. With this type of bankruptcy filing, your bankruptcy attorney helps to negotiate a deal between your creditors, yourself and the bankruptcy courts. This deal stipulates that each month of the given time period, you will make payments to your creditors, though generally at far lower lesser amounts than you would be if you weren't filing for bankruptcy. In exchange, the creditors agree to stop trying to collect more money, and at the end of the time frame, all of your debts are considered forgiven.
Chapter 11
Chapter 11 is what you probably heard a lot about when you turned on the news over the past several years and heard about financial institutions filing for bankruptcy. It didn't necessarily mean that they were shutting their doors (though this did happen on occasion); generally, a Chapter 11 bankruptcy involves a restructuring of debts and setting up a payment plan to creditors (similar in nature to Chapter 13). Through this restructuring of a companies debt, the company is able to keep its doors open and continue business as usual, so that following the bankruptcy, they don't have to start entirely from the ground floor again.
What to Do...and What NOT to do...when filing for bankruptcy.
If we can offer just one piece of advice to follow when starting the process of filing for bankruptcy, it would be to retain the services of a bankruptcy attorney. Yes, there are costs associated (as with any legal counsel), but the headaches you will avoid, not to mention the risks of filing incorrectly and being penalized, more than make up for the costs of a lawyer.
One of the reasons bankruptcy law is so complicated is that after a 2005 bankruptcy reform, bankruptcy legislation was turned over by and large to state jurisdiction. That means that each state has its own laws, bankruptcy forms and exemption statuses to deal with, and keeping everything straight can be a nightmare. You've already been through enough to get you to the point you're at today, so do yourself a favor and hire a lawyer. It's truly the best decision you can make.
On the flipside, one thing you should absolutely NOT do is file for bankruptcy too soon. Let us be clear - while bankruptcy can, and does, provide a means for starting over, it is not without its drawbacks. Specifically, a bankruptcy will stay on your credit report for ten years. During that time, you will find it difficult or impossible to secure large lines of credit, typically needed for the purchase of a home or car. So think long and hard before deciding that bankruptcy is truly your last resort - and again, speak to a bankruptcy attorney. He'll walk you through the Means Test - the determining factor to see if you qualify for bankruptcy - and be able to advise you on the best course of action. You owe it to yourself and your family to make the right decision; so be diligent, explore the options, and devise a plan that makes the most sense.
To review debt relief alternatives to bankruptcy in California and to get a free debt relief analysis, along with a free savings estimate, simply answer a few online questions. It's free and there's no obligation.
Ok, I've decided to file. Now what?
Now that you've made the decision to file for bankruptcy, you have a few different options available. Whether you decide to file yourself, file online, or file with the help of an attorney, the first step is to make your bankruptcy status official by filing with the Bankruptcy Court.
Now, it IS possible to file for bankruptcy yourself, if you want to take on the mountains of paperwork. And you can also file for bankruptcy online, if you prefer to go that route. But it's important to consider that bankruptcy is, at the core, a legal matter. Therefore, for your future financial wellbeing, each decision you make needs to be the result of well informed, highly considered choices. The process of information gathering, as well as being able to understand the material, is one that would take time, diligence and a high degree of patience. For all of these reasons, we strongly recommend seeking legal counsel. Otherwise, you may be in for an even rockier road than you imagined.
Bankruptcy: 60 Days Later
At the end of the day, bankruptcy is an ordeal to go through. No one relishes the idea of having to start over, but sometimes it really is the best thing, and that's why the law exists - so you DON'T have to live under crushing debt for the rest of your life.
Once you file, all you have to do is wait 60 days (for Chapter 7 bankruptcy). That's the amount of time that your creditors have to challenge the terms of your bankruptcy plan. After that point, your debts are considered officially forgiven, and you can start fresh. In Chapter 13, you'll receive your Discharge of Debt notice 30-60 days after you complete your final payment according to the plan.
When this happens, take a moment to breathe easier. Having a bankruptcy on your credit report won't be the greatest thing in the world, but it won't be the worst either, and you can use your newfound financial freedom to make intelligent choices from this point on. You can also begin to reestablish your credit by taking steps such as getting a secured credit card -- which means you secure your credit card with an amount of money held in reserve at a bank. In time, with on-time payments, your money will be released to you, and it quite likely that your credit limit will be increased as well. You'll be well on your way to reestablishing good credit and this time around, you'll probably be better prepared to avoid the debt trap. Here's to your financial freedom!
For a review of debt relief alternatives to bankruptcy in California and to get a free debt relief analysis along with a savings estimate, simply answer a few questions online.
