Sunday, June 2, 2019

4 First Steps When You Need to File for Bankruptcy

Deciding to file bankruptcy is a difficult and complicated decision. While taking this step gives you relief from your mounting debts and the persistent calls from your creditors, it also comes with a price. 

Depending on the type of bankruptcy you file, you could be looking at damaged credit for the next seven to 10 years. As such, it’s important to approach your bankruptcy with your eyes open. If you stick to the following four tips, you’ll stand a better chance of getting rid of your debt burden through bankruptcy.

Identify Your Creditors

In order to get as much relief from bankruptcy as possible, you need to identify all of your creditors. These creditors need to go on your creditors list that you’ll submit to the courts. 

If any of your creditors don’t make it onto the list, then these businesses can still come after you even if you’ve filed bankruptcy. Putting all of your creditors on your bankruptcy papers allows you to get relief for all of your debts, with some exceptions like student loans.

Organize Your Assets

You will need to list your debts in two columns, one for your secured debts and one for your unsecured debts. Unsecured debts are debts like credit card and personal loan debts. Secured debts (collateral debts) are items like cars, personal possessions, and other physical objects. 

According to Nerd Wallet, in order to complete your bankruptcy, you may have to give collateral like cars or other items back to the business you bought it from. You may also have to sell off some of your physical collateral items; the money you earn from the sale would go to the creditors you owe money to. 

You’ll need to indicate in your bankruptcy paperwork which types of debts you have. Be sure to make a complete listing of both to ensure that no debts are missed.

Hire an Attorney

Choosing the right type of law firm services ensures that your bankruptcy will go as smoothly as possible. A knowledgeable bankruptcy attorney can look over all of your paperwork and offer you suggestions for how to deal with your assets, your debts, and other bankruptcy-related matters.

Choose the Right Kind of Bankruptcy

Two kinds of bankruptcy exist for individuals, Chapter 7 and Chapter 13. People who need complete debt relief - that is to say, the eradication of all of their debts - choose Chapter 7. It stays on your credit for 10 years.

Chapter 13 is a debt reorganization plan. It’ll be on your credit for seven years. People who choose this type of debt do so in order to make their payments more manageable. Chapter 13 will get rid of some of the overall debt. More importantly, this type of bankruptcy allows debtors to take control of their debt while still giving some money to their creditors.

Filing for bankruptcy can bring you some immediate financial relief. However, it also negatively impacts your credit. By following the previous four tips, you ensure yourself the best chance of having the best outcome from your bankruptcy. While this decision is difficult and comes at a great cost, it can also put you back on the road to financial recovery if you approach it right.

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