In cases where debt far overwhelms your ability to pay, things can get really stressful. Bankruptcy can be the answer, but filing is not as straightforward as most people think.
Filing for bankruptcy can be an overwhelming process, especially if you don’t know the first thing about it. Fortunately, there are easy ways to know what the right time to file is. Read on to learn common signs it’s time to declare bankruptcy and how to prepare yourself.
If You Have No Real Assets
Bankruptcy may be your only option if you have no real assets, which is common among young entrepreneurs. Often, these cases are filed under Chapter 7 bankruptcy, because you have no equity in a home or other major assets to protect. In a Chapter 7 bankruptcy case, you get to start over with a clean slate by essentially erasing your debt and getting a fresh financial start.
If You Have No Income
If you have no income, consider filing for bankruptcy. Talk to a local nonprofit or your case manager at your social services agency. They may be able to help. You can also call your state’s attorney general, who can direct you to free legal aid. Remember, though, that filing for bankruptcy doesn’t automatically make you ineligible for government assistance; it just gives you some breathing room while you work on getting back on your feet.
If You Can’t Afford Food and Rent
Although it’s a bit of a catch-22, if you can’t afford food and rent then bankruptcy may be the best option. However, before you do anything, call a reputable bankruptcy attorney and set up an appointment. They can help you figure out what your next step should be.
Don’t forget that filing for bankruptcy means giving up some of your basic rights. You will have to pay back some debt eventually or risk going to jail, so make sure to plan accordingly! If you are planning on filing for bankruptcy, there are a few things you will need to know when you talk to an attorney.
You Will Need To Know the Whole of All of Your Debts
One of the immediate things you will be asked when you go to file personal bankruptcy is how much debt you have. You can pull a free credit report to find out the name and contact information for every creditor that is saying you owe them money, and this list will include debts you may have forgotten about.
You Will Need To Know How Much Tangible Property You Have
Do you own real estate property that is not tied up with a lien? Do you have vehicles that are paid for and not partially owned by the lender? These examples are tangible property assets, and you will likely have to give a list of these assets when you file bankruptcy. You may also be asked to give a description of any furniture, electronics, firearms, collectibles, and other forms of property you own. This even includes things like designer clothes and family heirlooms, so keep in mind that you may be forced to forfeit items you truly care about.
You Will Need To Know How Much Money You Have in Your Bank Accounts
It may seem like something that should not be included, but the bankruptcy court may request personal banking statements to show how much funding you have available in any bank-held accounts. Even though this money may be your savings, it may be assumed that you should use the funds to pay some of your debts.
You Will Need To Know Your Annual Income
Your annual income or current income will determine what type of personal bankruptcy will work best for your financial situation. For example, someone with a higher income may be better suited to chapter 13 bankruptcy and someone with a lower income may need a chapter 7 bankruptcy. You may be required to get statements from your employer that show what your anticipated income will be and how much you are currently making.
You Will Need To Know if and When You’ve Filed Bankruptcy in the Past
You can’t just go and file bankruptcy repeatedly; there are laws outlining how many times you can file within a certain span of time. If you have filed bankruptcy in the past, it is important that you know how long it has been since you filed.
If This Isn’t Your First Time Declaring Personal Bankruptcy
If you have a history of filing for bankruptcy, there are ways to lessen their impact on your credit score. Filing personal bankruptcy can stay on your credit report for 10 years, though that varies by state. Your best bet is to stick with Chapter 13 bankruptcies if you have a past bankruptcy under your belt. This kind allows you to keep all of your property and pay back creditors over time, so long as you meet certain qualifications set by a judge during or after the process.
Filing for bankruptcy might be the best choice for you right now, but it’s certainly not an easy one to make. Consider these aspects of filing for bankruptcy to help you get the fresh start you need. Once you have made the choice, be sure that you are prepared with the information outlined here.