Things To Remember Before Declaring Bankruptcy

2019/02/25

Bankruptcy is that legal status which is made avail to an organization or a person who cannot repay his debts to the creditors. Generally there are two types of bankruptcies. They are involuntary bankruptcy and voluntary bankruptcy. There are also various rules in a larger dimension with different angles for declaring bankruptcy.

A Real Boon for the Creditor- Involuntary Bankruptcy

In case of an involuntary bankruptcy, the creditors have the provision to file a petition against the debtor so as to claim a portion for them or for initiating a restructuring. The approval of petition makes the bankruptcy an unavoidable need for his debtor. No creditor can force his debtor towards involuntary bankruptcy.

There are certain requirements to be fulfilled. There should be a minimum number of creditors and also a minimum amount too. These things vary depending on whether the debtor is an individual or a firm. A debtor on the other hand can also file objections against the bankruptcy petition within a period of twenty days after receiving the notice. Then the judgment is made based on the hearing in court.

The Great Option to the Debtor-Voluntary Bankruptcy

This is a good option by the debtor to safeguard him from the atrocities of the creditor. Here the law protects him usually. Sometimes the debtors have more debts than their assets and they can’t pay the bills to the creditor. Under such a situation they can file for bankruptcy. This type of bankruptcy is called voluntary bankruptcy. The earnings of the debtor are not automatically taken over due to this type of bankruptcy.

Most people who apply in this case usually don’t have any savings after meeting their day-today living expenses. So nothing from their earnings will be claimed to the creditors. When a situation arise letting the authority to have a belief that the debtor can afford to make payments, he will be asked to do so, generally on a monthly basis.

In a nutshell, it can be said that declaring bankruptcy usually favors both the groups of creditors and debtors.

But it is always advisable to remember certain things before declaring bankruptcy.

Choose the Best Among Attorneys

Combination or consolidation of all the debts a debtor have can be very beneficial to him. This allows him to pay relatively lower interest rates for his loans. The attorney you choose should help you for that. Go on for those who are affordable by you. Certain attorneys even allow free consultation. By declaring bankruptcy you can’t be ensured that you have done the best possible solution for your problems.

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If you have a huge amount of debt to pay and you have no alternatives way, then declaring bankruptcy is the best possible option for you. Else it has its own shortcoming. Get detailed information about the nook and corner of this process from your attorney. There are attorneys who are specialized in bankruptcy and they can surely help you in successfully declaring bankruptcy.

Bankruptcy Affects Credit Scores

Bankruptcy harmfully affects your credit scores. It retains the mark on the credit report, may be even up to ten years and it depends on the complexity of bankruptcy filed. But the fore-sooth fact is that you need not panic about this matter. Soon after the accomplishment of all these bankruptcy processes, you can start to build up your finances. And you can make the credit score to bounce back if sensible and reasonable financial decisions are taken by you thereafter. First of all, just remember that survival in the adversities of these debt matters the most. So never move back from declaring bankruptcy if you have no other option.

Aware of the Debt which are Non-Dischargeable

Certain debts are considered to be non-dischargeable or obligatory. This means that filing a bankruptcy case in this regard is not going to help you. So before declaring bankruptcy, be aware of those debts of yours which are actually obligatory. Seek the help of your attorney. The main type of debts which come under this category are student loans, alimony, debts in income tax and child support. If these debts constitute the majority parts of the debt you have, it is never sensible to seek bankruptcy as they will retain even after that.

Keep Ethics and Values

Have concern for your co- debtors too. If you succeed in declaring bankruptcy, law will protect you. But your co-debtor is still responsible for the debt for which you have the same role to play. So consult him before taking any such decisions and opt the choice of declaring bankruptcy only as the last shelter.

Strategies for Reducing Debts

There exist certain strategies for those for whom the debts are still manageable namely debt stacking and debt snowball. Based on these strategies you can start to work on the elimination of your debt in a very well organized manner. Debt snowball deals with the elimination of the lowest debt firstly and then moves on to the higher debts. Debt stacking or debt avalanche prioritize the debt you have, depending on the interest rates.

Settlement of Debt

Settlement of debt is also a wise step to take before declaring bankruptcy. This method favors those who are not fully submerged in debt and still have a little capital. They need not worry even if they don’t have enough money to pay back for the creditors. You can hire any settlement firms to deal with comprise between you and the creditor. This allows you to pay a lesser total amount than which you actually had to pay. But even you succeed in this approach you will have a fall in your credit ratings.

Declaring bankruptcy releases the debtors from their personal liabilities for a certain type of debts. This means a debtor is safeguarded by the law from his creditors by not paying any discharged debts. Discharge acts as the permanent order which is directed to creditors asking them to abstain away from the discharged debts of the debtors. Even though declaring bankruptcy is a widely used means for many debtors worldwide, it has a lot of drawbacks too like imposing many restrictions on the debtor. The action of declaring bankruptcy has also resulted in many fraud plays. So better stay away from falling in debt. Manage the wealth wisely for a prosperous financial future.

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