Obviously, many of us have heard of people declaring bankruptcy or perhaps at one time maybe you had to file for bankruptcy yourself. From a financial point of view, what is bankruptcy? It is basically a legitimate option that can be or must be considered when financial obligations can no longer be met by an individual or a business. In this context, the key indicator is financial obligations falling past their due. The discharge period for a first time bankruptcy filing is normally a little under a year which of course would differ on a case to case basis.
We must realize that because of all the bad press that surrounds bankruptcy, the entire process has a negative connotation. This is quite unfortunate when you consider that it is a legitimate way for you to pay off debts while successfully saving your personal properties from being sold off or foreclosed.
Bankruptcy also provides you with a way to get back on your feet by improving your financial condition usually within a period of five years. If you look closely at what bankruptcy offers, preserving your personal assets helps to keep you afloat while you avail of a more reasonable repayment package based on your current financial condition and usually at a lower interest charge. All of these work in your favor as a debtor and should therefore put bankruptcy in a more positive light. From a personal standpoint, whenever difficulty in keeping up with financial obligations becomes an issue, bankruptcy should always be a consideration.
Other equally important aspects of bankruptcy include:
- Since bankruptcy is a legitimate way for you to deal with debts that you cannot pay at the moment, it basically frees you from the obligation to allow you to have a fresh start. This fresh start however comes with some restrictions which essentially restructures your original debts so you can pay them at a lower interest rate or sometimes no interest. This process if taken from the point of view of business allows your assets to be shared equally among all your creditors.
- It should be understood that bankruptcy is not something that you simply declare; you have to file a petition with a bankruptcy court that has jurisdiction over your residence. The petition can be filed primarily by yourself, as the debtor, to acknowledge you can no longer keep up with your financial obligations. You should keep in mind though that you must pay the filing and administrative fees, otherwise, your petition may be dismissed. Normally you have to accomplish a bankruptcy petition form to complete this process.
- Aside from the petition, you also have to declare the actual state of your affairs. This means you need to provide the court with a detailed list of all assets, debts, and creditors. You must keep in mind that all creditors including their names, addresses, and amount being claimed must be declared to allow the court to pay all of them correctly. Creditors not included in the list will not be able to claim payment of your debt and will defeat the intent of the process entirely. This state of your affairs is accompanied by a declaration that you must take an oath on before a certified officer of the court to be considered legal.
- To simplify the process of declaring bankruptcy, an online form is available through an interactive service on the Internet. This online service allows you to partially complete the form and save it. You now have the option of retrieving it at a later date to provide additional information before submitting the completed form. All information that is provided in the online form will be transferred to a secure database and will be made accessible once you have complied with all the legal fees required.
- It is possible to execute a bankruptcy order even if you do not agree with it or refuse to acknowledge it. This means that once the proceedings have begun, you really do not have any other option but to cooperate to make everything go smoothly. If you want to make a separate agreement with a particular creditor, this should be done prior to the execution of a bankruptcy order; otherwise you may find it difficult and more expensive as well.
- You must understand that almost anyone can file for a bankruptcy including individuals involved in a business partnership agreement. The procedures that cover the bankruptcy process for individuals and companies may differ slightly because of the circumstances that surround each condition. Essentially filing for bankruptcy can be done voluntarily or involuntarily. Voluntary filing means the debtor initiates the bankruptcy process while involuntary filing means that the creditor is the one who petitions the court to declare the debtor as bankrupt. Involuntary filing normally occurs when the debtor fails to meet demands for payment made by the creditor.
- It is equally important to understand the consequences of filing for bankruptcy. Normally when you file for bankruptcy you lose control of your assets because a court appointed trustee will ensure that all assets will be used towards settling your financial obligations. You also no longer have the privilege of obtaining credit unless specifically agreed upon by the lender.
- When you file for bankruptcy you must also ask the permission of the court when you want to form a limited company or management unit. The same goes when you want to put up a new business, unless you inform all persons and entities tied into your bankruptcy petition. Being declared bankrupt also gives the courts the right to publicly examine your affairs in order to ensure that you comply with the provisions of the bankruptcy order.
What is bankruptcy and what does it mean to you? In general, bankruptcy attempts to protect the interests of all parties involved. This means that it will not only work for your creditors but for you as well. What you must keep in mind though is that there are other options that you can avail of to settle financial obligations like restructuring of loans or taking on bad credit loans for example. However, when all else fails, bankruptcy is your safest option to preserve your personal assets.