Sometimes you find yourself deep in debt, and no matter how much you try to realign your finances, your debts seem to keep piling up. Times like this are when you should consider filing for bankruptcy.
Bankruptcy is where you prove before a court of law that you’re unable to settle your liabilities. The court then weighs your income against your debts and how much you can repay your debts with your assets. The judge may decide to erase all your debts or devise a payment plan for you to settle some of them.
Still, you might want to note that a court of law can’t discharge some debts. These obligations include alimony and child support, government penalties, taxes, fines, and student loans. The six types of bankruptcy include Chapters 7, 9, 11, 12, 13, and 15. But Chapters 7 and Chapter 13 bankruptcy are the most commonly filed by individuals. Learn more about Chapter 13 in this video:
Filing for bankruptcy can be stressful. Here are six tips you need to help you while filing for bankruptcy:
- Compile A List Of All Your Creditors
- Provide Full Disclosure
- Don’t Take Too Long Before Filing
- Do Not Transfer Any Assets
- Hold Off Any Loan Repayments After Filing
- Filing And Inheritance
- Final Thoughts
While you might want to leave some of your creditors out of your bankruptcy filing process, providing the court with a comprehensive list of all your creditors is a mandatory requirement. Failure to report a creditor means the particular debt might not be discharged under bankruptcy. Even though you have alternative means to repay the debt, including the creditor is a must.
Before the bankruptcy case is determined, you must give full disclosure of all your assets, previous attempts to settle some of your dues, and any ongoing litigation. You also want to do the same with any foreclosures and repossessions, previous sources of income, and any property ownership transfer. You should inform the actual state of your current and previous business ventures.
In line with the penalty of perjury, once you’ve provided all the information, you must sign a statement. This statement confirms all the information you’ve provided is accurate before the emergency bankruptcy petition proceedings commence.
A bankruptcy discharge is not something you can get regularly. You need access, particularly if filing for bankruptcy is your best option. You can qualify for a Chapter 7 discharge six years after you file for Chapter 13 bankruptcy. You also qualify if you haven’t previously filed once every eight years.
However, this shouldn’t be a reason to wait too long before filing for bankruptcy. Because the more you wait, the more your debt accumulates together with any accrued interest. As soon as you realize you can’t meet your financial liabilities, talk to your attorney to file for bankruptcy.
Representing yourself might seem more accessible in a bankruptcy proceeding. However, representing yourself can be costly, especially if your creditors filed a lawsuit against you. Bankruptcy gives you protection against liens, so ensure you file before the creditor attaches any liens to your property. An experienced attorney can assist you with the process since it’s an area with which they’re familiar.
Transferring your property or part of it to other family or friends right before filing for bankruptcy might seem tempting to you. Whether you’re transferring your assets for safekeeping or hiding some of your assets, it’s illegal and can cost you your bankruptcy discharge. In some cases, hiding your assets can even earn you criminal penalties.
Suppose you sold a part of your property to offset some of the money you owe. In this case, the court can order you to explain this with proof and supporting documents that you used it to settle some of your debts.
If you pay any loan to any creditor within 90 days of filing, a court of law can term that as a preferential transfer. The bankruptcy trustee may be forced to pursue an adversarial proceeding to get a refund of the funds, especially if the creditor is an individual. Any repayment to family and friends a year after filing is also prohibited.
If in the next year you’re set to receive any income tax refunds, any lawsuit settlement in your favour, repayment of a loan advanced to someone, or an inheritance from any of your relations, then you shouldn’t file for bankruptcy. You can use these funds to clear your debts without getting a bankruptcy discharge. The best option is to discuss with your attorney if there are any other options you can pursue as you await the funds.
A bankruptcy filing can be rigorous and draining. Working closely with an attorney who can guide you is ideal to make the whole process seamless and less stressful. Make sure you consider bankruptcy when you’ve exhausted all other avenues.
Disclaimer: MoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.