When many of us hear about bankruptcy, we think of the classic state of bankruptcy in the game of Monopoly. But bankruptcy is not a game. Rather, it is an entirely serious state of financial affairs that cannot be taken lightly. The bankruptcy laws are very complex, and even have bankruptcy experts arguing about the real meaning and intent behind the complicated rules and procedures that have been put into place.
There are various kinds of bankruptcy, both for personal and business bankruptcies, and each type is different. The various types are designed to strike a balance between meeting the needs of the creditors without doing more damage than what is absolutely necessary for the person who is filing bankruptcy. This article will outline the basics of the type of bankruptcy commonly known as Chapter 7 Bankruptcy, which is one of the more popular forms of bankruptcy.
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Before we get into that, be aware that filing for bankruptcy is not a decision that should be taken lightly. The huge red flag stating that you have filed bankruptcy will appear on your credit reports for the next 7 to 10 years, and will haunt you with being denied credit as you try to rebuild yourself or your business, as well as being required to pay higher interest rates on credit for those creditors who are willing to "take a risk" with you. There are multiple alternatives to filing for bankruptcy, and each option should be fully considered before you decide that bankruptcy is your only or best option.
Chapter 7 bankruptcy is the type of bankruptcy also known as liquidation, where the person filing bankruptcy turns over all their assets to be sold (typically at an auction), and the resulting money is used to pay off or partially pay off all creditors. The reason this can be attractive to some people is that if the person filing bankruptcy has few assets to be sold off, so the remaining debts are discharged over a period of three to six months, giving that person a "quick start" to rebuilding their life with no debts.
If you have a larger amount of assets that could be sold to pay your debts, you may wish to consider a different form of bankruptcy, since most of those assets will no longer be available to you after you file bankruptcy and the proceedings move forward. Also, be aware that the bankruptcy laws vary, sometimes widely, from state to state, so the bankruptcy laws in your state may be different, and may even not allow you to file for this type of bankruptcy.
Your best bet - again, after investigating all possible options and alternatives to following through with filing bankruptcy - is to meet with a bankruptcy lawyer who is very familiar with the bankruptcy laws in your state, or the state in which you are considering filing. A good bankruptcy lawyer can look at your specific situation and make recommendations for your options, alternatives, and if appropriate, the type of bankruptcy that you should file in order to provide the most amount of benefit to you. There is a free bankruptcy evaluation form at our web site that will allow you to talk with a bankruptcy attorney who is local to you and familiar with the laws in your state.
Do not file bankruptcy in a vacuum. Make sure you know what you are getting into and what the ramifications will be. The bankruptcy laws are complex enough where doing it all yourself is not a good option, and you would be best advised to get some guidance from someone who knows the laws in your state.
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