The world appears to be in a tizzy. Beneath the surface of a normal routine life or within corridors of power, there is the tension of an unspoken word that looms large and reveals horrific truths periodically. It dislodges even the most seemingly stable foundations on which empires and great support systems were once built, reducing them to nothing in minutes. The tension is bankruptcy. Below are some FAQs as explained by a San Diego bankruptcy lawyer.
Today bankruptcy is no more restricted to a certain strata of society. Bad spending habits, bad investments or a sudden fall of the stock market, anything could have an impact. So heave a sigh of relief if you find yourself on the verge of bankruptcy. There are even people and websites that are debtor friendly. Do check https://www.ndc.org/, one such web services offered to debtors. Some questions below are answered by a San Diego bankruptcy lawyer to help you with useful information.
How Exactly Does One Become Bankrupt?
There are two ways – creditors approach courts and declare a company or person bankrupt and the court passes the order, or you voluntarily file for bankruptcy. The next steps involve confiscation and liquidation of all assets. The cash thereby generated is returned to the creditors.
How Does One Voluntarily File For Bankruptcy?
There are two ways to voluntarily file for bankruptcy. It is best to consult a lawyer to choose the right way for you.
Chapter 7 Bankruptcy
Also known as ‘Straight Bankruptcy’, this is the most common way to file for bankruptcy. The reasons are many including recession, unemployment, alcoholism, substance abuse, marital discord, heavy unpaid medical expenses etc. The process is quite simple. Once you file for bankruptcy, the courts liquidate the assets and distribute the generated funds among the banks and creditors. After four months you are discharged from bankruptcy but your credit history will reflect the same for the next ten years.
However all is not lost. Many have led healthy lives after declaring chapter 7 bankruptcies, even bought homes and made property. The main disadvantage with Chapter 7 bankruptcy is that you cannot hold onto any asset. An ancestral home or any property that has sentimental value cannot be retained, everything is confiscated. It only allows for a fresh start.
Chapter 13 Bankruptcy
For people who still have a means to repay long-term through a salary for example, this option is better suited. It allows holding onto your assets and to pay off debts in three to five years. This is a grace period granted and debts that remain post this period are discharged. Upon declaring Chapter 13 Bankruptcy, also known as reorganization bankruptcy, the creditors will no more contact or hassle the debtor, while he/ she clears debts over the stipulated period, thus retaining all assets. The main advantage here is that the debtor need not give up all assets and can buy time to pay up dues.
How Do I Check If My Financial Health Is Slipping?
Make a checklist of your assets and liabilities. List down your entire financial assets to include liquid cash, stock, bonds, deposits, real estate, cars to name a few. List down what you owe – credit cards bills, other bills, loans etc. Compare the two. Simply put, you are in trouble if what you owe far exceeds the value of your assets.
However, unless there is no way out, it’s best not to declare yourself bankrupt. Even though its no causal step to be taken, it might just be that fresh lease of life you require to move on in life!