The Complete Guide to Bankruptcy and How it Helps You Get Out of Debt

Bankruptcy definition

Bankruptcy is a legal process that is used to get out of debt. A person or companies can file for bankruptcy if they are insolvent meaning that they cannot repay their debts. Bankruptcy is also known as the “fresh start” because it provides protection from creditor harassment while reorganizing your finances.

Bankruptcy is a financial approach in which you declare that you are unable to repay your creditors now, or that you do not see a means to repay them in the future, and you seek protection from your creditors. An individual may file for bankruptcy under either chapter 7 or chapter 13 depending on their income and the amount of money they owe to creditors. Bankruptcy, on the other hand, is a highly publicized event in either circumstance. Your name and address will be published in at least one of the local newspapers for all of your friends to see, and your neighbors will witness movers arriving to confiscate some of your belongings on the day of the auction. For many people, the most difficult aspect of bankruptcy isn’t losing their money; it’s losing their sense of self-worth and dignity.

Bankruptcy is a type of insolvency proceeding in which a person or company has assets that are worth less than the amount of liabilities. Bankruptcy is designed to give an honest but unfortunate debtor a chance to start over with a clean slate by getting rid of some or all of his/her debt.

The first step in dealing with this is to recognize that the vast majority of your friends and family members have experienced financial difficulties at some point in their lives. Despite the fact that they may not have resorted to bankruptcy, there is no doubt that only the very fortunate do not feel drowned by debts at some point in their lives. Simply said, folks will comprehend what you’re saying. Despite the fact that you may believe that everyone is laughing at you behind your back, the truth is that the vast majority of people are truly sympathizing with you.

Also keep in mind that not everyone will be aware that you have filed for bankruptcy. Most people do not spend the time necessary to read the newspaper with care, and even while word spreads quickly, it is not a topic that is frequently brought up because it is not particularly intriguing. Although you may believe that you are the center of attention, the majority of people are likely to have been unaware of your existence.

Even if others become aware of the situation, it is critical to continue the process. If you’re humiliated, just remember that you’re not alone; there are millions of other people in this country who are feeling the same way. You are not alone in your feelings. It is possible that you will be eligible to receive counseling to assist you through the bankruptcy procedure. You may be shocked at the number of people who have declared bankruptcy and gone on to achieve great financial success.

If declaring bankruptcy is the best option for your family and financial position, it is critical that you follow through with the process. Consider taking care of yourself first before worrying about what other people think of you. Instead of what your neighbors have to say, it is more vital to focus on what you are doing to get yourself back on track financially so that your future might be more promising.

The goal of bankruptcy is to allow an individual, family, or company to get out of debt and focus on the future. There are two types of bankruptcies: Chapter 7 and Chapter 13.

READ ALSO:

CHAPTER 13 BANKRUPTCY VS CHAPTER 7 VS CHAPTER 11

The Main types of Bankruptcy

Bankruptcy can be classified into three types: Chapter 7 and Chapter 13

A bankruptcy filing is a way for you to get out of your difficult financial situation, and it is something that you must do if you are unable to make payments on your existing debt obligations.

Keep in mind that there are many other varieties of bankruptcy, but the most usually filed forms of bankruptcy are chapter 7 and chapter 13 in the United States.

Chapter 7 bankruptcy

Chapter 7 bankruptcy: It is used for liquidation and can be filed by corporations and individuals who desire to get rid of their assets in order to repay their debts.

Chapter 7 is the most frequently encountered by the individual. It is the complete and total cancellation of qualified debt. The debtor is then released from any and all obligations to make payments. Please keep in mind that chapter 7 bankruptcies are extremely serious matters that should not be taken lightly.

While it provides you with a quick fresh start in terms of restoring your finances, it remains on your credit report for a period of ten years. You will continue to be viewed as a high risk, and you will be labeled as someone who is financially irresponsible as a result.

Chapter 13 bankruptcy

Chapter 13 bankruptcy: This type is mainly used by individuals, but corporations can also file it, and it allows you to keep your assets and make monthly payments over 3-5 years.

It is less damaging to your credit to file for Chapter 13. Despite the fact that you still have marks against your name, the fact that you will be trying to return your debts on a payment plan does not give the impression that you are financially reckless, despite the fact that you are still regarded a slight credit risk. If you file for chapter 13 bankruptcy, you will be able to keep your house, and the government will not begin selling your assets to pay back your creditors, as they would do if you filed for chapter 7.

In 2005, legislation was implemented that makes it more difficult for individuals to file for chapter 7 bankruptcy protection in the United States. You should realize that you should attend pre-filing credit counseling sessions as well as post-filing financial counseling sessions in order to get yourself back on track financially.

It is critical that you consider both the advantages and disadvantages of filing for chapter 7 and chapter 13 bankruptcy. You must determine which of the two will cause you more harm than benefit. Choosing a bankruptcy that will assist you in resolving some of your financial issues will be another consideration in your decision making.

Counseling for bankruptcy

The decision of when to file for bankruptcy is not one that many people want to make. However, you’ll find that there comes a moment at which it may be necessary to take this step. If you file for bankruptcy, you should be aware that it will have an adverse effect on your credit rating, as well as other consequences.

Filing for bankruptcy should only be considered as a last resort after all other options have been exhausted. When, on the other hand, should you seriously consider filing for bankruptcy?

If you find yourself regularly borrowing money from one creditor to pay another creditor, you may want to consider filing for bankruptcy protection. If you find yourself having to take cash loans of more than $500 just to cover your living needs, you should seek help.

You take out a loan to cover monthly expenses such as food and electricity bills. You’ve stopped picking up the phone since the only calls you’re getting are from collectors and debt collectors.

Are you being sued by creditors who have threatened to sue you? Some legal action against you has already been taken against you by them. You will discover that all of these are indications that something is seriously wrong, and that you may want to consider applying for bankruptcy protection in the near future.

When you reach this point, you must decide what type of bankruptcy you will apply for relief. Chapters 7 and 13 are the most frequently encountered. With a chapter 7 bankruptcy, you will discover that it will completely eliminate all of your debt while also providing you with an immediate fresh start. If you file for Chapter 13, you will be responsible for payments for three to five years.

If you have exhausted all of your other alternatives, you should seriously consider filing for bankruptcy. Maintaining a sensible perspective on your financial status will be essential for you to succeed. If you seek professional guidance from a bankruptcy lawyer, you will also discover that they will inform you of your alternatives and, if bankruptcy is your final resort, will assist you in initiating the bankruptcy filing procedure.

How to avoid bankruptcy

To know How to Avoid Filing for Bankruptcy, we have to keep in mind that when it comes to bankruptcy, you’ll want to explore for alternatives because you’ll need to find a strategy to pay off your personal and commercial debts.

You can keep yourself and your family out of financial problems and avoid bankruptcy if you take the correct actions from the start.

First and foremost, you must educate your children. Many of us weren’t given the tools and knowledge we needed as children to build and maintain good credit and avoid the threat of bankruptcy.

You should be open and honest with your children about your finances, but you should also be able to guide them in making good decisions in the future. Teaching youngsters that hard work, regardless of the job, pays off, and that sticking to a budget eliminates the fear of bankruptcy.

In order to avoid bankruptcy, you’ll also need to create a budget. You can’t spend what you don’t have because you don’t have it. Many people nowadays have many credit cards, which means they are spending money they don’t have, plus interest.

You should also avoid paying off your credit cards with another credit card. This is a terrible chain reaction that will lead to nowhere. You’ll have to spend what you can and only what you can.

However, you should have something set aside in case of an emergency. You will discover that having at least two thousand dollars set aside for just in case purposes is a fantastic idea.

It’s yet another step toward avoiding financial difficulties. The most crucial thing, though, is to keep an eye on your money account. Don’t put yourself in a position where you have to overdraw.

Keep in mind that many people rely on their overdraft to keep them financed each month, but you will find that your activities are not only damaging to your credit record, but they are also harmful to your finances. More than a third of adults rely on their bank’s overdraft to keep them afloat from month to month. Individuals that engage in such behavior are on the verge of bankruptcy.

Author: Simeon Bala

An Information technology (IT) professional who is passionate about technology and building Inspiring the company’s people to love development, innovations, and client support through technology. With expertise in Quality/Process improvement and management, Risk Management. An outstanding customer service and management skills in resolving technical issues and educating end-users. An excellent team player making significant contributions to the team, and individual success, and mentoring. Background also includes experience with Virtualization, Cyber security and vulnerability assessment, Business intelligence, Search Engine Optimization, brand promotion, copywriting, strategic digital and social media marketing, computer networking, and software testing. Also keen about the financial, stock, and crypto market. With knowledge of technical analysis, value investing, and keep improving myself in all finance market spaces. Pioneer of the following platforms were I research and write on relevant topics. 1. https://publicopinion.org.ng 2. https://getdeals.com.ng 3. https://tradea.com.ng 4. https://9jaoncloud.com.ng Simeon Bala is an excellent problem solver with strong communication and interpersonal skills.