How Does One Declare Bankruptcy?

Declaring bankruptcy might be one of the hardest things that you will have to do as an organization or as an individual. It can be so hard to admit that you need help getting out of debt, or it is not possible for you to do it alone. However, people tend to ignore signs and end up in a much worse situation. Fearing bankruptcy could prove to be very bad, as with a good layer and information you can have yourself a fresh start.

If you are trying to ignore the ringing phone and the unpaid bills which are stacking up at your desks, then chances are you need to file for bankruptcy. So stop ignoring the question of whether you should file for bankruptcy, and throw in the towel. So, how does one file for bankruptcy? Well, we are here to tell you that today. Here’s how one declares bankruptcy.

How do you declare bankruptcy?

There are two ways in which a person can go bankrupt. The first is the easier and the more common one, which is when the person voluntarily files for bankruptcy. The second way is what you would want to avoid. In this situation, creditors themselves ask the court to order a person bankrupt. As you might’ve figured out, this doesn’t give much room to the person at hand.

There are quite a few ways in which you can file for bankruptcy. Every way has its advantages and disadvantages. As every situation is different, one way might work better for you than the other. We would advise you to consult a good lawyer before proceeding to file the case for bankruptcy. This way you can easily figure out what will work best for you. Here are two ways in which you can declare bankruptcy.

Filing for chapter 7 bankruptcy

Chapter 7 offers a quick fresh start for many people, and is also sometimes referred to as “straight bankruptcy”. You want to file for chapter 7 bankruptcy when you are unemployed or have large medical expenses, have overextended credit, or have marital problems. This chapter covers your debts by liquidating all your assets i.e convert all your assets into cash, and then distribute it among your creditors. 

The record of bankruptcy stays on your credit report for approximately 10 years. Also, if you need to keep any personal assets that are important to you, chapter 7 might not be the best option for you.

Filing for chapter 13 bankruptcy

If you want to keep any property or personal asset, this is the way you should file for bankruptcy. This type of bankruptcy is also known as a reorganization bankruptcy. This way enables people with consistent and predictable annual income with some time to pay off their debts. This period is generally 3 to 5 years, and after this period all the remaining debt is discharged. All the creditors are ordered to stop contacting the debtor after the bankruptcy is approved.

Conclusion

However scary it may sound; bankruptcy is a necessary step. If you feel your financial situation is in the dumps, then don’t be afraid. Use the law and get yourself a new start.