by Gail Wilson
Disclaimer: The following information provides an overview of the things that you need to consider before you file for bankruptcy and isn’t a replacement for legal advice. If you’re planning to declare yourself or your business bankrupt, you would want to consult a licensed attorney right away who specializes in bankruptcy cases so that they can provide you with more information on what to expect should you decide to pursue it.
The stigma surrounding bankruptcy may be why you haven’t looked into it as an option to consider if you plan to lighten the load that your massive pile of debts is giving you. However, you can take comfort in the fact that United States federal courts have reported that more than 70,000 individuals and businesses have declared themselves bankrupt as of June 2017. Thus, you would want to get past bankruptcy’s negative connotations and file for it whether as an individual or as someone who runs a business. But before filing for bankruptcy, here are some things that you need to consider:
You can file for any of the three most common types of bankruptcy used by individuals and businesses.
If it’s your first time to declare either personal or business bankruptcy, you might initially have the impression that you can file it as is. However, debtors like you have several types of bankruptcy to choose from, three of the most common being Chapter 7, Chapter 13, and Chapter 11.
● Despite the threat of assets being seized and sold to their creditor – or the people or institution that they owe money from, most debtors prefer filing for Chapter 7 bankruptcy anyway as it’s the most popular type available for both individuals and businesses. But if you’re hesitant to declare Chapter 7 for yourself or your business because of the previously mentioned threat, you can check your state’s list of bankruptcy exemptions to know more about which among your personal or business assets you can keep.
● Alternatively, if you want to retain every personal or business asset that you have, you can file for Chapter 13 bankruptcy in the corresponding court and simply tell the judge how you plan to proceed with settling your outstanding debts to your creditor.
● Only large businesses and corporations typically file for Chapter 11 bankruptcy as it involves restructuring an entire business itself so that it can continue normal operation despite being already declared bankrupt. So unless you’re running a large-scale business yourself, you might want to steer clear of filing for Chapter 11 bankruptcy even if you can technically do it to keep all your personal or business assets.
2. The court where you and the lawyer that you’ll be hiring to help you file a bankruptcy claim charges a filing fee which the latter can pay.
There’s no free lunch at all in real life as you have to pull some money out for almost every move you make. If you think that you don’t have to pay for anything once you declare yourself or your business bankrupt, you couldn’t be more wrong as the court where you’ll be filing for bankruptcy will charge you for it.
● Bankruptcy courts charge a filing fee ranging from more than $300 to less than $2,000 depending on the type of bankruptcy listed above that you’ll be declaring for yourself or your business. The most expensive filing fee belongs to Chapter 11 since as previously mentioned, only huge businesses usually apply for it.
● But as you might be wondering how you’re supposed to pay the filing fee that the court where you’ll be filing for bankruptcy if you’re declaring yourself or your business bankrupt, you can, in fact, have your lawyer pay it for you.
3. Bankruptcy isn’t meant to wipe your financial slate clean of all your debts.
If you’ve been under the impression that bankruptcy is supposed to relieve you of all your debts, you would want to ditch that immediately after reading this.
● Some of your debts can be relieved – or discharged, to use the more proper term as applicable to bankruptcy itself – once you file for personal or business bankruptcy like credit card charges, medical bills, and financial obligations under a lease or contract, to name but a few.
● But other debts like financial support to both your children and former spouse if you’ve undergone either legal separation or divorce, student loans, and income tax liability, again to name but a few, can’t be discharged at all when you file for bankruptcy. Thus, you would want to make sure first that you haven’t incurred any non-dischargeable debts – or if you have them, you should fully settle them – before declaring yourself or your business bankrupt.
If your personal or business debts are giving you a hard time and sleepless nights, you might have considered filing for bankruptcy. But as declaring yourself or your business bankrupt is typically supposed to be performed only as a last resort option, you would want to read the above-listed things for you to consider first before you file for bankruptcy. To help you come up with a more informed decision as to whether to pursue bankruptcy or not, you would also want to click here to talk to a lawyer with a formidable background in personal and business bankruptcy filings. After all, you simply don’t file for bankruptcy without arming yourself with sufficient information about it.
Gail Wilson has more than 12 years of experience under her belt when it comes to business, which she is currently sharing with her clients and peers as part of the law industry. She writes pieces on various law topics that she hopes could help the common reader with their concerns. A family oriented, Gail loves spending time with her husband and two sons during her free time.