Bankruptcy

Overview

You can declare bankruptcy when you cannot afford to pay your bills and you want to save your assets from being taken by the bank. With this declaration, you can reduce and eliminate the debts you owe.

How It Works

Depending on the state in which you live, you will need to follow the appropriate guidelines based on the state law. Most of the bankruptcies are filed in the United States Bankruptcy Court. So you will need to hire a lawyer to help you state your claim in the court before a judge. While doing that, you will freeze your debts and eliminate those that you simply cannot pay off. Current bankruptcy filings, however, have rules that require the filer to pay at least some of their remaining debts. So you might not be able to completely clear your debt load. You can file for bankruptcy only once in eight years.

Benefits

There are many benefits in filing for bankruptcy. First of all, getting a fresh start on your debts and financial security will help you begin to amass savings and get ahead of your everyday bills like food and utilities. While bankruptcy does not necessarily wipe out all debts (like alimony, child support, etc.), it can give you some breathing room to rebuild your financial situation.

You will also be able to start fresh with your budgeting plans, teaching yourself how to avoid this kind of situation and to manage money in a positive manner. If you have encountered bills that are beyond your control, for example medical bills, filing for bankruptcy can allow you to focus on your health instead of what you owe to others.

Along with benefits, there is one major disadvantage to filing for bankruptcy that you should keep in mind. First of all, this will stay on your credit report for up to 10 years. This will affect your ability to get new credit cards, low interest rates, and even loans. So, filing for bankruptcy should only be the last resort.

Cost/Pricing

While you can file for bankruptcy without a lawyer, this is generally not recommended. So, you will have to pay for the lawyer, and there can be court costs as well that you will need to pay when you file your case.

Timing

You can file for bankruptcy under the Chapter 7 of the Title 11 of the United States Code once every 8 years. So if you've already filed one, you will need to wait until this time period has passed to file the next one. When you begin to recognize that you will not be able to pay off your mortgage payments and other outstanding bills, you can call a bankruptcy lawyer to see when you might need to file for bankruptcy.

Companies/Industries

You will need to find a lawyer who specializes in bankruptcy law to help you navigate the system. You can also find self-help tools online that will direct you, should you want to complete the process on your own. Filing for bankruptcy is not difficult, but it can be time consuming.