March 4, 2024

The word “bankruptcy” is not something to be taken lightly. There are few words in the English language that strike such an ominous chord. Derived from the Italian bancarotta, the term was used to describe the ancient practice of breaking a money changer or lender’s bench or table to show that he had run out of money. Everyone knows this definition, but what are the things an average person would need to know about bankruptcy as a legal term? And what does one need to keep in mind before filing for it? We answer these questions for you below:

When to File For Bankruptcy

Consider the following questions:

  • Are you receiving calls from bill collectors and/or collection departments?
  • Have you been using your credit card to pay for your basic necessities?
  • Are you only able to pay the minimum amount on your credit cards?
  • Does organizing your finances scare you or inspire feelings of anxiety or helplessness?
  • Are you looking into debt consolidation?

If your answer to any two or more of these questions is a yes, then you may want to take a good, long look at your finances. When your debt has ballooned in such a way that you can no longer afford to pay for it, then maybe it’s best to file for bankruptcy.

However, a word to the wise: filing for bankruptcy is a significant decision and can be laden with pitfalls if not done with proper guidance. It’s crucial to seek the advice of lawyers specializing in debt relief and bankruptcy if you’re seriously considering this option. They can best assist you on how to handle your specific situation, though reading on will give you a general idea of what to expect.

Filing for Bankruptcy Doesn’t Make It All Go Away

You might think that filing for bankruptcy is the fastest way to get collection agencies out of your hair, permanently. It would do you well to know that not all debt can be forgiven or is “dischargeable” in the parlance. Should you owe alimony or child support, you will be expected to pay up the amount you owe currently, as well as cover any payments you may have missed. Business-wise, unpaid taxes will need to be paid as well, even after other debts have been wiped out.

You Need to Pay To File for Bankruptcy

Also, you have to spend money in order to file bankruptcy. Courts charge a filing fee, and any legal counsel you hire will also need to be paid as well. Since it is vastly unwise to go into filing for bankruptcy without the guidance of an attorney, we strongly recommend against going at it alone. The process for filing for bankruptcy can be extremely complicated and you can be barred from filing again. These expenses can rack up, but payment plans do exist for people who are under an enormous financial weight, which allows them to hire a lawyer and cover the filing fee.

Bankruptcy Can Limit Your Ability to Get Financing in the Near Future

Say you were able to bounce back after filing for bankruptcy and you’ve since been able to secure financial stability and solvency. Now that you have the money, you may find lenders that are hesitant to extend credit. People who have filed for bankruptcy often find themselves unable to take out significant loans for a house or a car, for example, or a new credit card.  These limitations usually end a year or two after filing bankruptcy but it is something to be aware of.

In conclusion,the benefits of debt relief through bankruptcy usually far outweigh the drawbacks.Still,filing for bankruptcy is a serious decision, so educate yourself, hire a good lawyer, and be prepared. While the concept itself is daunting, filing for bankruptcy can also be the best decision you’ve ever made, and the push you’ve always needed to start anew.