Whilst the option of going bankrupt is not something to be taken lightly, if you’re in a serious financial position where you are trying to keep your head above water whilst dealing with debt, bankruptcy could end up saving you a lot of money.
See, the greatest challenge when you are trying to save money whilst pay off debt, is that debt incurs such massive fees. Indeed, the fees you end up paying on top of the initial debt often keep you trapped in a never ending cycle, where it feels like you are taking one step forward and one step back, meaning you are standing still, spinning your wheels.
Therefore, whilst bankruptcy should only be used ethically, it can offer a clean slate which means you are in a less “shackled” position to step off this treadmill, of not getting anywhere fast, freeing yourself to not only save money in fees… but start to get your financial situation back within your control.
This article takes a look at the most common way to file for bankruptcy in the US. This is known as “Chapter 7 bankruptcy” and will usually result in your debt (or at least most of it) being discharged – meaning you are no longer liable to pay what is owed. That said, it’s not all sunshine and rainbows – some of your assets may be collected and sold off in order to settle the outstanding debt.
Let’s now take a look at five common aspects relating to bankruptcy.
LEGAL ASSISTANCE
Technically, you can file for bankruptcy yourself, though most people will appreciate the assistance bankruptcy lawyer to handle their affairs. The cost associated with bankruptcy is kept relatively low when compared to other types of litigation, both in court fees and attorney fees, for obvious reasons.
TIME SCALE
Chapter 7 bankruptcy can take as little as three months from the initiation of your application being filed, presuming it’s a simple case, though four to six months appears to be a more average timeline.
ELIGIBILITY
Your eligibility is based on numerous factors including income and whether you’ve previously filed for bankruptcy. The most pertinent aspect is that your application is made on good faith, meaning you are not trying to evade earnest liability; an example of bad faith in bankruptcy proceedings would be to conceal assets or misstate your income with a view to making an undue gain.
BENEFIT OF BANKRUPTCY
In addition to the benefit of no longer having liability for the debt a bankruptcy order provides an injunction which instantly stops creditors from their collection activities. This means, wage garnishments, for instance are cancelled; and a lot of the stress associated with debt collection is dissolved as creditors can no longer threaten to take assets and so on – as the matter is now being dealt with much more strictly with the protection of the court.
AFTER BANKRUPTCY
Whilst your debt will be written off, and in some ways, your slate is wiped clean – your credit history will be severely affected with the status of bankruptcy, and it’s important to remember that certain types of debt cannot be discharged, such as student loans or tax debt.
At least you will have the chance, after bankruptcy to start making money again that isn’t all being spent on debt, and get yourself in a more stable financial position.
