The word “bankruptcy” tends to strike fear into our hearts, especially if we are going through financial trouble. But most people don’t see themselves filing for bankruptcy. It seems that the process is made for companies, government agencies and other organizations in bankruptcy. But personal bankruptcy laws exist to protect citizens who find themselves struggling with severe debt. If your finances fall into the red zone, the following steps will help you get back on your feet:
Assess the damage
Take a close look at your financial portrait. If you owe large sums to multiple creditors, if collectors are calling your house, or if you find yourself paying for essential items with a credit card, you should start considering remedying your situation. Start by counting your financial assets: bank account balances, retirement funds, stocks and bonds, real estate, vehicles, and anything else of value. Once you have a grand total, compare it to the amount you owe. If your assets are worth less than your total debts, you should seriously consider filing for bankruptcy.
How do I submit?
You can voluntarily file for bankruptcy as soon as you determine it is necessary. Alternatively, your creditors may force you to file a return. Regardless of how your legal process originates, do not try to navigate it alone. Contact bankruptcy attorneys who will take a close look at your circumstances and advise you on how to proceed. There are two different claims you can file, so an attorney will help you determine the legal route that best suits your interests.
Filing a Chapter 7 Claim
A Chapter 7 claim is pretty straightforward. If approved, this claim liquidates your assets and uses them to pay off a large portion of your debt right away. In other words, you convert most of what you own into cash and then distribute this cash to your creditors. It sounds scary, because you lose most of your possessions. But it’s not the end of the world: Many people get back on their feet and rebuild their assets without all that debt holding them back. Especially with trusted bankruptcy attorneys on your side, this process can lead to a much-needed fresh start.
Filing a Chapter 13 Claim
Since they involve the seizure of most of the filer’s property, Chapter 7 claims are not great for people who own businesses, property, and other significant assets. When you have large properties that you don’t want to lose, a Chapter 13 claim is the best option. It allows people with consistent and predictable annual income to pay off their debts during a grace period of three to five years. Once a judge approves a Chapter 13 claim, creditors must stop contacting the debtor. The debtor then continues to work, paying his debts to the best of his ability during the grace period. In this process, assets and other assets are not liquidated.
Bankruptcy attorneys will tell you: Filing isn’t that scary, and it can dramatically improve your situation. If you let unpaid bills pile up and try to ignore them, know that you can look into legal options to ease the stress of debt and protect what you own.
