Filing for bankruptcy is a major decision that no one should take lightly. However, if you’re struggling with debt and considering bankruptcy, it’s important to understand the process so you can make an informed decision. Here’s everything you need to know about what happens when you file for bankruptcy – if you still require more information after reading this, there are tutorials on debt available online.
Credit Counselling
The first step in filing for bankruptcy is to receive credit counselling from a legitimate credit counselling agency approved by the government. During this session, you will work with a credit counsellor to go over your financial situation and discuss potential alternatives to filing for bankruptcy. In some cases, credit counselling may help you avoid having to file for bankruptcy altogether.
Filing for Bankruptcy
Once you decide to move forward with filing for bankruptcy, it’s time to gather all your financial documents and file the necessary paperwork with the court system in your state. You will also have to pay a filing fee, which varies depending on which type of bankruptcy you are filing for. Once the paperwork is complete, your creditors will be notified of your intentions, and it is at this point that they’re now unable to continue collection efforts against you.
Reorganisation Plan or Liquidation
Depending what type of bankruptcy you’ve filed for, the next step is to create a repayment plan that outlines how much money each creditor will receive based on how much money there is available after expenses are taken into account. This reorganisation plan usually lasts anywhere between three to five years. Other forms of bankruptcy might require all your non-exempt assets to be liquidated in order to pay off as much debt as possible before your debts are discharged.
Declaring bankruptcy isn’t easy, but sometimes it’s necessary if debt has become overwhelming and other options aren’t viable solutions anymore
Understanding what happens when you declare bankruptcy can help provide peace of mind and clarity during an otherwise difficult time — allowing people who have made this tough call to feel better prepared and better informed about the next steps involved in the process going forward. Regardless of whether or not someone ultimately decides that bankruptcy is their best option, knowledge really is power — so understanding what happens when declaring bankruptcy could make all the difference down the line!
