Most of us are morally obligated to pay our debts. We strive to make timely payments on borrowed loans, even if it means compromising our basic needs. One only considers filing bankruptcy when all other solutions of resolving debt have been tried and failed.
Bankruptcy is the last resort for escaping financial troubles, but it is not the end of the world. You can view it as a fresh start or an opportunity to regain financial stability.
If your income is down to zero, a big pile of bills are pending, and creditors have made your life a living hell, filing bankruptcy is probably the right move. On the contrary, your financial situation might not be as bad as you imagine.
You shall seek guidance from a financial advisor or bankruptcy lawyer near you to obtain clarity over the matter. For now, you can ask yourself the following questions to reach a conclusion:
Do you qualify for Bankruptcy?
You might make up your mind about filing bankruptcy only to later discover that you don’t even qualify. There are many types of bankruptcy cases and each of them has certain quotas or limitations.
Your income could be too high to qualify for a certain bankruptcy or certain provisions may go against your interests. Do your research and learn about the requirements before making this decision.
What kind of Bankruptcy do you wish to file?
Chapter 7 and Chapter 13 are the most common types of bankruptcies filed today. Chapter 7 is the most efficient form of bankruptcy, as it winds up within six months. Chapter 13 is suitable for individuals with a high income, but the duration is three to five years. Each type of bankruptcy has different prerequisites and implications, so get your priorities straight.
Are you burdened by Unsecured Debt?
If you are looking to get rid of colossal amounts of debt, Chapter 7 is your best bet. However, you need to understand that bankruptcy only waives off unsecured debt; this includes unpaid utility, medical, and credit card bills. Student loans, alimony, child support, and taxes cannot be discharged.
Secured debts are loans obtained against collateral, so you will either have to pay them off or return the borrowed property. Chapter 13 allows you to pay all your debts in smaller installments over a longer period; unsecured debts could be partially discharged.
Are you hoping to hold on to certain assets?
Chapter 7 liquidates your assets to pay off creditors; some immediate property, such as the house you live in and the car you utilize for daily commute might be retained. Chapter 13 allows you to keep all your assets, as long as you abide by the payment plan organized by your bankruptcy trustee. You need to figure out which property you cannot afford to lose, and which isn’t worth keeping.
Do you have any Disposable Income?
If you have a high and steady income, you may not fit the eligibility criteria for Chapter 7. You will probably have to opt for Chapter 13, which allows the bankruptcy trustee to confiscate your disposable income and use it to compensate creditors.
The court will take control of your finances and spending; you may feel coerced to live on a budget until the end of the bankruptcy period.
Are Creditors harassing or threatening you?
If creditors are tormenting you and your family for payments, bankruptcy can shield you against them. Following bankruptcy, they will be legally barred from contacting you or demanding money in any way. The court shall also issue an automatic stay if you are worried about losing your home.
John Adams is a paralegal who writes about widespread legal and social issues. He helps readers overcome challenges and solve many personal problems the smart way, rather than the hard way. He aims to reach out to individuals who are unaware of their legal rights, and make the world a better place.
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Ahmmed Adekunle Aleem well known as SIR 3PU (Sir Triple) is a Personal Finance and Music Blogger. He’s a Content Editor at Wiseloaded.com & Financenaija.com.
If he’s not online, then he’s playing Video Game or watching Manchester United’s match