Should I File For Bankruptcy?

What is Bankruptcy?

Bankruptcy is a type if legally declared lack of the ability or financial impairment that is a statement that the person or company has been rendered financially incapable of paying its creditors. Creditors have the option to file a bankruptcy petition against the debtor that declares bankruptcy to try and gain some portion of the finances owed to that creditor. However, in most cases, bankruptcy is initiated by the debtor because he or she or the company is unable to pay for the debts that are held by the creditors. Bankruptcy basically occurs when a business or an individual gets in too deep with debt and are unable to financially uphold the business or household.

There are two major types of bankruptcy that occur in the majority of cases, these are Chapter 7 bankruptcy which deals with the basic liquidation of assets and property of an individual or business, this is the most common form of bankruptcy, though it is closely followed by Chapter 11, the second most common form that deals with the rehabilitation or reorganization of a business or individual that have substantial debt. Apart from these two major forms of bankruptcy, there are 4 other types of bankruptcy. These include Chapter 9 which deals with municipal bankruptcy; Chapter 12, which deals with farmer and fisherman rehabilitation; Chapter 13, which deals with payment plans for individuals with a regular income; and Chapter 15, which deals with international cases of Bankruptcy. Most of these bankruptcy forms do not occur very frequently, though they are available for most cases of bankruptcy that have occurred at least semi-commonly.

What happens when I file for Bankruptcy?

After someone files for bankruptcy, a stay, or hold is put on that individual’s credit to prevent further collection activities from creditors. Roughly a month after bankruptcy is filed, a meeting with the creditors to which you owe money to is arranged and takes place in order to discuss the terms of the bankruptcy. However, sometimes, creditors will not attend; however, a bankruptcy trustee is legally bound to attend.

After this meeting, the bankruptcy trustee goes over the papers with you; this trustee might ask questions on some parts of the bankruptcy information to make sure the amounts listed are accurate and not fraudulent. The property filed and claimed to be exempt is then given to the bankruptcy trustee at the meeting. The bankruptcy trustee then begins to process the selling of assets to begin the repayment of creditors. At this meeting, you will most likely be informed that it is currently against the court, this illegal, to privately sell, give away, or throw away any assets or property without permission from the courts.

After this, you must wait for the “limbo” period to pass. This is the time where you cannot sell, give away, or throw out any assets or property. However, during this limbo period, you are free to still back out of the bankruptcy by requesting a bankruptcy dismissal to the courts.

Should I file for Bankruptcy?

Bankruptcy is a dangerous thing to declare. It does allow one to waive debts, but it also has many adverse effects that can last many years for the individual or business that is declaring it. This is why bankruptcy is often thought of as a last resort for debtors. One of the most important things to realize is that if you should file for bankruptcy, it will appear on your credit score for no less than 10 years. It is also important to know that if you should decide to file for bankruptcy, you cannot file for bankruptcy for at least 7 years.

It is a devastating happenstance that plagues the person for 10 years, thus declaring bankruptcy should only be declared if there is absolutely no other option available at all and only in the most severe and irresolvable occurrences should someone consider declaring bankruptcy.