Bankruptcy is the way some people use to reorganize their debts; it is a legal process where a company or individual can publicly declare that they do not have the means to take responsibility for their obligations.
One of the reasons people file for bankruptcy is that it is a way to get a fresh financial start. Once the decision is legalized, they can liquidate their assets to pay off debts.
Benefits of filing for bankruptcy
Although many claims that there is no advantage to the bankruptcy process, the truth is that for those with too much debt, there are some benefits:
Acquiring protection from legal action
During the process, the debtor enjoys the protection of the federal courts to avoid complications arising from legal actions that creditors may take. For this reason, many companies make this decision.
Can eliminate some debts
When your bankruptcy petition is approved, a way to eliminate the debt is offered almost immediately. Plans are often developed to make full or partial payments in the most convenient way for the debtor.
Acquire protection against discrimination
Protection is provided by the government, which will not allow any discrimination against the bankrupt to proceed. For example, if you are part of a company and declare bankruptcy, the employer cannot fire you.
Protect your property
This benefit will depend on your bankruptcy type; you can protect your property against liquidation or seizure in some bankruptcies. That is, creditors will not be able to take it as part payment of debts.
You will learn new financial habits
Declaring bankruptcy will deprive you of some benefits, such as your credit cards; this will teach you to live with what you earn and spend what is necessary. Financial problems often start when you want unnecessary credit to buy things you don’t need, helping you improve your credit history and increase your credit score when you emerge from bankruptcy.
How do I file for bankruptcy?
Filing for bankruptcy is a completely personal decision and one that you should properly evaluate before proceeding. It is advisable to file for bankruptcy when you have made every effort to meet your debt payments but have been unable to.
The first step is filing a petition with the U.S. Bankruptcy Court, which requests relief and protection under the U.S. Bankruptcy Code.
To proceed with the formal filing, you must provide documents to know your assets, liabilities, income, and expenses. It is common for you to have a lawyer responsible for the whole process of the petition and the delivery of the information.
Especially when the bankruptcy is on behalf of a company; however, if you want to carry out the full process alone, there are no impediments.
Can I receive a denial of the bankruptcy petition?
It is not a situation that is commonly observed; however, to approve a bankruptcy, the person’s income is evaluated and compared with the number of debts they have. One of the reasons that generate a denial is that you have lied about the price of your assets or the monthly income you earn.
It is also common when you try to hide any of your assets or annual income; the courts will do all the relevant investigations before approving you for bankruptcy. Therefore, you must be completely truthful when filing.