Filing for Bankruptcy

Filing for bankruptcy might seem like a simple solution to digging yourself out of debt, but it can have serious repercussions.

Filing for bankruptcy means that you have decided that you will never be able to pay your debts and instead you have decided to submit yourself to the protection of the state.

Not only will filing for bankruptcy result in a terrible credit rating which will tarnish your credit history for years, it will also usually result in the liquidation of most of your assets to provide a means of repayment for your lenders.

The Procedure:

  • A person or business may voluntarily assign himself into bankruptcy or may be petitioned into bankruptcy by his creditors.
  • The petition is filed along with an alphabetical list of all creditors and their addresses with the clerk of the Bankruptcy Court
  • The court then appoints a trustee who will oversee your case with your creditors
  • When filing for bankruptcy individuals will need to present all the information pertaining to their property and debts.
  • The person filing for bankruptcy must also file a written statement of all property to be surrendered to secured creditors
  • A written statement must also be compiled detailing secured debts to be reaffirmed and paid after the bankruptcy

Filing for bankruptcy should be a last resort in terms of dealing with debt. There are many other options that you can exercise before you turn to bankruptcy.

Alternatives to Filing for Bankruptcy:

  • Cut down on spending and reorganize your budget
  • If you are out of work take advantage of unemployment insurance and public assistance programs
  • Try to liquidate any assets you have to obtain money to make payments on your debt
  • Restructure your debts so that they are more manageable (this might involve calling creditors and lenders to renegotiate interest rates and payment schedules)
  • Hire a credit counselor to help you gain control of your finances

Filing for bankruptcy isn’t the end of your financial worries, in fact it’s just the beginning. Because bankruptcy can sit like a festering wound on your credit history for anywhere between seven and ten years, it is important to do everything within your power to avoid it.