Things To Consider Before Filing For Bankruptcy

With the advent of the internet, there are so many opportunities that are now open for individuals to do business. Consumers have also been buying things online which has made ECommerce a multi-million industry.

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There are those who will make it and be successful in the online business arena while there are those who will fail. If left unchecked, these individuals may incur a huge debt due to business operations, which may lead them to consider filing for personal bankruptcy.

 

This problem is not limited to individuals who are in business alone. Consumers are also prone to fall into the debt trap. Students who avail of student loans are prone to get into huge debt even before they start working and earning a salary.

 

Personal bankruptcy should not be taken lightly, a lot of things need to be considered before an individual should file for bankruptcy.

 

What Is Bankruptcy

Bankruptcy is a legal remedy for a person that is not able to pay debts to creditors. It involves a court proceeding wherein a judge will examine the financial statements of an individual and decide whether to give a court order to release them from the liability for their debts.

 

Bankruptcy laws were created to give people who failed in their financial management a second chance to start again. It does not matter to the court if the personal bankruptcy was due to a bad business decision or industry decline. Legislators believe that everyone deserves a second chance.

 

PACER stats from the American Bankruptcy Institute shows that in 2016 almost 95.5% of the 499,909 chapter 7 bankruptcy cases filed were discharged. That’s a huge number of people getting second chances.

 

The small number of cases that were dismissed were due to the fact that the individuals failed to prove to the courts that they no longer had the resources to pay for their debts.

 

Individuals who file for Chapter 13 bankruptcy also known as “wage earner’s bankruptcy” experienced a little above 50% success rate in getting their cases discharged.

 

When To Declare Bankruptcy

 

Individuals who file for bankruptcy most often get their cases discharged by the courts because they have far more debts than resources to pay for them and there is no chance of their situation improving soon. In 2015, those who filed for bankruptcy owed a  total of $113 billion and had assets valued at $77 billion.

 

It is a surprise to find out that individuals are the ones who are often filing for the cases and not businesses. The problem lies in taking on loans that they don’t have the income to pay for. They often get a mortgage, auto loan and student loan all at the same time.

 

One should take note that filing for bankruptcy affects your credit rating and it may either prevent or delay foreclosure on a home and repossession of a car. It can also stop wage garnishment and other legal actions that creditors may use against you to collect the debt.

 

There is no right time for one to declare bankruptcy. If you feel like it will take you more than 5 years to pay off all your debts then filing can be done to give you a fresh start.

 

If you also feel that the constant phone calls, demand letters

and possible cases filed by creditors are causing a lot of stress and is starting to have an effect on your overall health and well being.

 

Once you file your case it usually takes 6 months or more to complete. All actions by creditors should cease once you file a case in court. Long-term penalties will include a bad credit report for 7 to 10 years.   

 

How To File For Bankruptcy

Filing for bankruptcy is a legal process that can either reduce, restructure or remove your debts completely. Filing with a court is the first step. You can file this on your own or with an attorney. Take note that, bankruptcy costs include attorney fees and filing fees.

 

The filing also takes a process that may be tedious for many. It’s not just about telling the judge that you don’t have any money anymore so give me a discharge. You have to prove it in court by compiling all your financial statements and presenting them.

It is also mandatory to get credit counseling within 180 days before you file your case in court. This must be done with a provider listed on the United States Courts website. The good news is they now offer online and phone counseling which saves you on travel expenses.

 

Once you receive a certificate of completion, you can proceed with the filing of your case. Finding a good bankruptcy lawyer is recommended because there is a risk of having the case dismissed if you represent yourself

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