Filing for Bankruptcy: When to File for Bankruptcy
No one would like to be bankrupt. The term itself is scary and would make anyone worry. You may hear about stories about celebrities who filed for bankruptcy in the media, but it is crucial to speak to a business reorganization attorney to understand your situation. Not only will you hear about bankruptcy in the corporate world but also with small companies.
We live in a world where we are constantly bombarded by sales, credit cards, and many other things that might make us bankrupt. Living in debt is normal, but how do you know when to file for bankruptcy?
Evaluate Your Circumstance
If you believe that you're almost or in a situation where filing for bankruptcy is the only option, you may have to think about your finances. You have to understand that you have more debt when you're bankrupt than you can pay.
If you want to find out about your financial status, you need to liquidate the assets you own. You will have to include real estate, stocks, pension funds, savings, cars, and more. It would be best if you got an estimate for each asset that you own. Afterward, you should add up the finances you have. If the total amount is less than what you owe, filing for bankruptcy is the only option you have. Still, it would be best if you approached it with a sound mind. It is not straightforward.
How do You File for Bankruptcy?
You can approach bankruptcy in two different ways. The first one is where you should willingly declare bankruptcy. The other method is where the creditors will request the court to say that you're bankrupt. There are several different ways, but each one of them has its advantages and disadvantages. You should consult a business reorganization attorney if you don't know what to do.
Chapter 7 Bankruptcy
Most people file for Chapter 7 bankruptcy for several reasons. Whatever the reason, you may find that you're not alone. The most common reasons for being bankrupt are medical bills, divorce, credit debt, and job loss.
Chapter 7 is also known as "straight bankruptcy." Chapter 7 bankruptcy will sell off the assets you own so that you get to pay your debt. The cash obtained will be paid off to credit card companies and banks.
After four months, you should get the discharge notice. Then the bankruptcy record will be on the report for ten years. Even with the announcement, it won't mean you can't acquire anything. Most people who have filed for Chapter 7 bankruptcy have purchased assets even with similar records. Chapter 7 will provide a new chapter in your life.
Still, it is crucial to understand that Chapter 7 bankruptcies will not be ideal for everyone. Most people won't be comfortable with almost everything they own repossessed and sold to pay creditors. If the individual has a company, residential property, or any assets that he or she wants to hold onto, Chapter 7 is not ideal.
Chapter 11 Bankruptcy
Chapter 11 bankruptcy will seek to reorganize a business and ensure it stays operating while negotiations happen with creditors to pay a particular amount without taking assets.
It ensures the business structure remains as it is while allowing the crucial functions to continue as you pay the debt. It is one of the most complicated and most stringent choices available for entrepreneurs. It is the only option for people running a partnership, corporation, LLC, or any situation where you can't use Chapter 13.
Both the creditors and courts will agree and make things happen if you want Chapter 11 to move forward smoothly. It will mean that you get the right legal information from a business reorganization attorney so that the process happens without issues.
Filing for Bankruptcy: It Might Be Necessary
Of course, it is challenging to admit that you are in trouble, especially if you need to pay the debt. In most cases, you are unable to pay the settlement alone. However, you can take advantage of the bankruptcy laws that protect you and the creditors. It may be time to tackle the problem if you have a significant amount to pay.
Creditors will not stop calling, and the debt won't just go away. If you don't have another option, you could file for bankruptcy. It is crucial to do so if you're working with the right attorney. Filing for bankruptcy will give you the fresh start you need to build your financial status again.
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