A number of situations or your lifestyle may have led you to consider filing for bankruptcy, something that many people do. This legal process can help you wipe your slate full of debt clean so that you can get a fresh start, giving you breathing space. But before you file for bankruptcy, there are a number of considerations that you need to make. Going in with proper knowledge of what to expect can help you make the right call and plan accordingly, increasing your chance of benefiting from the process. Read on to see five things you need to know in order to file for bankruptcy.
1. There May Be Other Options
Before you begin the process of filing for bankruptcy, note that there may be other options for you. For example, you could sign up for credit counseling first, which is a requirement before you file for bankruptcy anyway. Look for an approved credit counseling agency on the website of the United States Department of Justice. You could also benefit from a mortgage loan forbearance program, which could help you to stabilize your financial situation. Remember that though bankruptcy is often the last resort for most people, it could be the first step you take towards rebuilding your future and finances.
2. It Takes a Long Time
You should also know that bankruptcy is not an instant fix for your lifestyle, as Chapter 7 bankruptcies, for instance, can take from four to six months to complete. Other bankruptcies can take a lot longer to complete, from three to five years. That said, find out the entire process for the bankruptcy you want to file. This will help you prepare accordingly and you can collect the necessary information and documents that will be needed for the process.
3. Some Debts May Not Be Eliminated By Bankruptcy
Another important thing to note is that, although bankruptcy can give you a fresh start, it may not necessarily wipe out all of your debt. Student loans may be difficult to be discharged in bankruptcy unless you can prove that you’re under undue hardship. Secured debts such as loans with collateral attached to them may not be discharged either, but unsecured debts like medical balances and some personal loans can. Something like mortgage debt, in which households in America owed a total amount of $9.12 trillion as of January 2019, is a secured debt and so it may not be discharged by bankruptcy.
4. It Can Be Very Complicated
The entire process can be complicated, and this calls for you to involve a professional. They will guide you through the process and alert you to any documents you need to prepare. As far as accountants go, make sure you hire a qualified one. Note that among small business owners, 14% think that accountants could do more to reduce the taxes they have to pay. Another 62% hold the opinion that their accountants do their best to this end, while the final 24% are undecided. This should give you a glimpse into how people feel about accountants and let you know it’s important to make an informed decision when choosing one to help you.
5. Be Wary of Bankruptcy Fraud
You generally get a 70- to 90-day period before you file for bankruptcy, and it’s important to avoid racking up debt during this period. This is because your creditors can object to your bankruptcy request on the basis of bankruptcy fraud. Another instance in which you’ll be in trouble is if you transfer your property to a relative before you file for bankruptcy.
Keep these five things in mind when thinking about bankruptcy. Making the right decision will help you get the best outcome in your future finances. It’s worth doing a thorough research and even hiring a paid professional, as doing so may improve your chances of getting favorable odds.