What Happens When You File Bankruptcy?

If you are thinking “Do I need to file finally?” â€œDo I need an attorney to file bankruptcy?” It is important for you to know all the basics of filing a bankruptcy.  

When you are doing business, there is a chance that you might fail to the point where you will need to file a bankruptcy to have another chance of restarting everything. Let us begin this article by defining what is bankruptcy.  

Bankruptcy is when a judge and court trustee examine a person’s businesses and liabilities of this person has filed for bankruptcy. After analyzing the data, the court decides whether to legally require the person who owes something to pay what is needed to pay or to completely discharge all the debts, giving the debtor another chance to restart.  

These laws were written and implemented to provide individuals whose finances have collapsed to start anew. Whether this is caused by bad luck or bad decisions, the laws provide anyone who files for this a second chance especially under a capitalist economy, where businesses and consumers have higher risks of failures due to competitions.  

Fortunately, almost all people and businesses who file for bankruptcy get this chance. In fact, from 2018 until the previous year September, there were 488, 506 chapter 7 bankrupt cases that were completed, and almost 95% of these cases were discharged, which means the person was no longer required by the law to pay his/her debt.  

When should you file bankruptcy? There is no perfect time to file for this only that if you are already mentally strained thinking of debts that you cannot pay within years. While generally and legally, a person is given five years to settle the debt. However, if the person is facing a lot of debts like credit card debt, mortgage debt, student loans, and medical bills, it is better to file bankruptcy and accept its consequences rather than suffer mentally.  

However, again, it is important to take note that a person needs to qualify for this and the court is the one that decides for this qualification. And although mostly all people who file for bankruptcy get the chance, a person may still not be granted the second chance to be debt-free. Other possible choices are a debt management program or settlement of debt where a person is given three to five years to reach a resolution.  

Furthermore, if a person is granted this chance, the person will experience the consequences in his/her credit report for seven to ten years which have a greater impact on her/her purchase capability as well as reputation.  

There are also different types of bankruptcy and it is imperative for an individual to know which one is suitable for him/her. These include chapter 9, chapter 11, chapter 12, and chapter 15. Lastly, before you decide to file bankruptcy and hire a lawyer for this, it is important to reassess the decision and opt for the alternatives if you think there is still a slight chance to rebound from the situation.