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18 Apr 2019   /   0 comments

Procedure to File for Bankruptcy

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In the current economic scenario, many people are running into debts and do not know how to repay. There are very few options for a borrower and one of them is to file for bankruptcy. However, filing for bankruptcy is a very big decision and always think very hard before you go ahead. Your credit rating can take a huge hit after you file for bankruptcy. So research well and consider all options before you go ahead with your decision.

What should I take care of before filing for bankruptcy?

If you decide to file for bankruptcy, consider all options and one of them is to consolidate all your assets and see if you can repay your loans using those funds. Here is a brief list of things that you should consider.

File For Bankruptcy

Weigh your options:  Filing for bankruptcy should be the last resort and if you have no other option. Before you go ahead, take a rain check of your financial status. Calculate the amount you need to repay for debts and see how much funds you will need. Contact the lenders and negotiate with them for a full and final loan settlement. The lenders may waive off surcharges and interest rates when you agree for a final settlement.

Document your debts: Analyze the type of debts you have. Some debts cannot be canceled even if you file for bankruptcy. If you have incurred debts that cannot be erased, then filing for bankruptcy is not a very good option for you. In the United States, most states have certain provisions for assets that are exempt from bankruptcy. Here is a list of debts that cannot be erased no matter what.

  • Payment of Alimony
  • Paying child support
  • If you incur debts after filing for bankruptcy.
  • Debts that you have incurred 6 months before filing for bankruptcy.file for bankruptcy
  • Fraud
  • Student loans
  • Other secured loans
  • Debts incurred due to deliberate damage of property.
  • Driving your vehicle when intoxicated and other DUI charges

When you file for bankruptcy, the court will seize all the valuable assets including property. The list of exempted assets will depend on the state that you live in. some assets can be protected even when you file for bankruptcy. Some of them are:

  • Cars, wedding jewelry, and your house
  • Valuable assets up to a certain value
  • If you file for bankruptcy under Chapter 13, you will be able to retain your assets. If you have high-value assets, you can sell them to pay off some of your debts.

Cosigners and bankruptcy: When a cosigner is with you, he or she agrees to pay your debts. In case you file for bankruptcy, the cosigner is still obligated to pay your debts.

Types of bankruptcy: There are a few types of bankruptcy which suit individuals depending on their financial position.

  • Chapter 7 is for individuals and businesses.
  • If you are employed then you can file for Chapter 13, which is also known as the wage earner bankruptcy. The court will instruct the lenders to give you a repayment plan.
  • Chapter 9 is for cities, villages, and towns and also school districts.
  • Chapter 11 is only for business houses. Chapter 12 is like Chapter 13, but more for businesses which have incurred 80% or more losses.

The type of bankruptcy you file solely depends on your financial position.

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