Breaking the Bank: Your Basic Guide to Declaring Bankruptcy

While you may have tried your hardest to avoid bankruptcy, sometimes it is unavoidable. In fact, bankruptcy can actually be a helpful thing to declare for some, as it allows them a level of financial control and relief that they did not previously have.

If your financial woes seem endless and are in need of some help, declaring bankruptcy may be the answer for you. But, you need to understand bankruptcy before you finally declare it. In order to do that, you’ve come to the right place.

Here is a guide on how to know when you need to declare bankruptcy, and what steps you need to take to do it.

Should You Declare Bankruptcy?

The decision to declare bankruptcy or not may be a tough one. Here are a few things to consider to make sure that declaring is the right move for you.

Big Cash Flow Crisis

If you or your business are going to struggle to pay back to debts that you owe for the foreseeable future, bankruptcy is a good option. Without declaring, this situation can lead to many creditors suing you or turning your debt over to a collection agency, which, if left unattended, will ultimately damage your personal finances.

Filing for bankruptcy is a good option if you are in the middle of a cash flow crisis because it will help you gather some relief from the debt collection and costly lawsuits. This will likely include the granting of a stay for your debts.

Intermingling Personal and Business Finances

While people usually warn you against intermingling personal and business finances, that is much easier said than done. If you have tied your business liabilities to your personal wealth and are now in danger of losing this, bankruptcy may be the only way to keep your personal finances safe.

Even with some legal protections, such as setting up your company as an LLC, you will still be susceptible to tough financial hits. This is when you will need to file for bankruptcy. These cases can vary by state or even by the judge that decides.

Your Wages Are Garnished

When you owe money to creditors, some states allow for your wages to be garnished if you have not paid off your debts. This can obviously have catastrophic effects on your family’s life and financial well-being. If your wages are being garnished, bankruptcy may be a solution to keep the money flowing.

With bankruptcy’s automatic stay in debt collection, your wages will no longer be garnished as you work out your debts through bankruptcy. This is a great sign for your family and yourself.

But keep in mind that bankruptcy does not cover some wage garnishments, including those in domestic situations like child support.

You’ve Tried Everything

You may have attempted to take some steps to fix your financial situation. This may include contacting the credit companies, doing your own liquidation of assets, or even trying to find other ways to pay off your debts or halt the collections. If this doesn’t work, however, the final option you can and should consider is bankruptcy.

Bankruptcy is not a death sentence. It is a challenge met by many Americans.

When declaring bankruptcy, keep in mind that it is intended for you to become financially healthy once again and to have other people taking a look at and helping you manage your money for long-term health.

How to Declare Bankruptcy

Now that you’ve decided declaring bankruptcy is your best bet, here’s how to go about that.

Identify the Type of Bankruptcy

There are various different types of bankruptcies to consider. Some protect individuals from losing their assets and seek other solutions, such as chapter 13, while bankruptcies such as chapter 7 allow for more direct handling of the issue. Finding the type of bankruptcy that will work best for you is key.

Once you identify the type of bankruptcy you want to declare, you will want to speak to a lawyer in order to help you file. This will ensure that you protect any assets you want to and you make the best deals possible for yourself.

If you need legal support during a bankruptcy declaration, Turner Law Office may be a great choice for you.

Gather Your Financial Information

Gathering your financial information is an important step of declaring bankruptcy. This will allow you to understand what you can use to help yourself financially and what steps you can take to be healthy.

There are various things you will need to gather, so be thorough. A judge may ask you for debts, income figures, assets held, and even your living expenses. Being honest and candid will help you get the best results long term.

Undergo Credit Counseling

You will need to undergo credit counseling before putting in your petition. This agency will advise you on which bankruptcy filing is best for you and they will create a repayment plan for you. 

You will need to prove that you attended counseling before you file for any bankruptcy protection, so be sure to do that ASAP.

Attend Creditors’ Meeting

At a creditors meeting, you will meet with a trustee to answer questions under oath about your current financial situation. You will then have a stay granted and your creditors will be given a chance to object or accept this stay.

Then, your assets will be liquidated as far as they need to be and you will be discharged and relatively financially healthy once again.

The Process of Declaring Bankruptcy

While declaring bankruptcy may seem like a difficult and intimidating process, it can be the key to reaching financial health and keeping your life going. This will allow others to look at your assets and responsibly use them to pay off your debts and will allow you to move forward well.

There are many reasons you may need a lawyer, and bankruptcy is one where an experienced law firm is absolutely necessary. If you need more financial advice or are looking for any other tips on managing your wealth, check out some of our other money articles!

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