A Closer Look At Bankruptcy

The federal courts have a process known as bankruptcy which is designed to help individuals and businesses clear their debts and manage repayments under the protection of a bankruptcy court. The two kinds of bankruptcy are: reorganization and liquidation.

Liquidation is a bankruptcy process where you make a plea to the court to discharge your debts on your behalf. Some of your properties are liquidated (sold) by the court, and the proceeds are shared among your creditors. Liquidation only lasts four-to-six months, and normally you only need to attend court once.

Liquidation is not an option for everyone. If you have used bankruptcy in the past six-to-eight years, you are not eligible. Also if after consideration of your debts, income, and expenditures it is determined that another form of bankruptcy would be more applicable to your situation, you will not qualify. Disabled veterans, however, who have amassed debts while in the military will normally be permitted to file. Similarly if your debts are a result of your business, you can file for liquidation as well. Outside of these categories, you must meet certain criteria.

One such consideration is that your income for the past six months prior to the date of filing will be compared with the median income of other similarly sized families in your area. If after calculations your income seems to be sufficient to support other bankruptcy proceedings – regardless of permitted expenses – liquidation will not be allowed. Social Security payments are not included in this total.

Liquidation is the form of bankruptcy that most people prefer. This is because the court will normally allow you to keep some amount of your possessions so that you are not destitute after the proceedings. That sort of legal flexibility allows a person to begin their “financial life” over without depriving them of everything. Plus it provides back to creditors at least some amount previously owed.

The other form of bankruptcy, reorganization, is a method in which you communicate to the court how much you intend to pay your creditors to clear your debts. Normally this is part of a 3-5 year plan. If maintained successfully, you can be freed of your debts if there is anything left outstanding. Sometimes a court will look at a person’s finances and even free a person before the plan has been completed.

If you do intend to file for bankruptcy, you will also be required to undergo credit counseling through a recognized and approved agency. During this process, you will be encouraged to look closely at your finances and make an informed decision whether you really do need to go down the road of bankruptcy at all. By doing this, you can better determine if you have missed any viable options for arranging agreements with your creditors and potentially avoiding the more drastic step of bankruptcy altogether.

Whatever the outcome, you will still need to complete post-bankruptcy counseling. The purpose is to ensure you do not allow your finances to become unmanageable in the future.

When Should You File for Bankruptcy?

Is there an exact time to file for bankruptcy? The answer is no. In fact, as much as possible, this should be the last thing on your mind. There are a lot of reasons why.
First, it destroys your credit rating. It will basically stay in your credit report for around 6 years. This will then make it so hard for you to find a decent loan or mortgage for yourself. The best thing that you can settle could be an unsecured loan, which is generally not good. It has a very high interest charge, and you can borrow a very small amount only.

Second, bankruptcy itself can be emotionally draining. Most of those who have gone through with it suffer from severe depression. There is a huge chance that they could be losing their valuable properties such as homes and vehicles to their creditors. It will also be a very long road towards recovery.

That is why you should consider non-bankruptcy options before you even decide to file for one.

Nevertheless, if there is no other way, think of it when you are already in the following situations:

The creditors will not stop bugging you. Do not underestimate your creditors. They can still be very patient; however, their patience does not really last for a very long time. It will become very short if you do not communicate with them by becoming out of reach at all times. Thus, they could start harassing you, calling you not only in your home but also in your office. They may even file lawsuits against you, which could mean more expenses and processes for you.

You have a huge outstanding debt. You may also have to file for bankruptcy if the debt that you have is something that cannot be removed by debt consolidation or refinance. With the bankruptcy process, you will have your assets turned over to the trustee, who will be the one responsible in disposing your assets to come up with the right amount of funds to pay off debts.

The living situation you are in makes it hard for you to pay. There are also some instances where your own living situation will prevent you from paying off your debts properly. For example, if you have plenty of dependents, already old, or out of a job, you may have to file for bankruptcy as your last effort to save yourself from all those creditors.

The Bankruptcy Process in UK

What do you do when you have already exhausted all the means to keep your finances afloat—but to no avail? The most significant recourse that you can do is to file for a bankruptcy. However, different countries have their own ways of dealing with this financial process. If you’re living in the UK, for example, you have to take note of the following:

Only the court can give the bankruptcy order.
There’s no other branch of the government or person who has the authority to consider you bankrupt than the UK court. However, before they can do that. You need to be able to present your own petition as well as that of your creditors. The latter should be those to whom you owe £750 or more.

There are a number of fees that you have to pay before you can consider yourself bankrupt.
First, you have to make a deposit of £250 for the administration of your bankruptcy. You also have to pay the charges associated with the swearing of your affidavit to the statement of affairs. You don’t have to shell out some money if you’re just going to deal with the county court. You also have to pay a court fee, which sums up to £120. However, this will be waived or reduced depending on certain circumstances. Have your situation evaluated first to know if you can actually avail of a much lower rate later on.

There are a lot of ways on how you can pay these charges. You can do it through postal order, cash, or check. However, if it’s going to be the latter, make sure that it’s not going to be a personal check.

Moreover, the fees will be collected separately, even if you’re filing as a couple, partners, or incorporators. Nevertheless, those who have filed for joint bankruptcy petition may only have to pay once.

It’s always best to simply cooperate.
Even if you don’t agree with the bankruptcy order, it can still be made. If you believe that you’re not really going bankrupt and that the creditors have wrongfully considered you as such, it’s recommended that you talk about it and settle whatever financial obligation you have with them before the bankruptcy order. Otherwise, it will cost you a lot, and the process will be long, before the decision can be reversed.

In the end, though, ensure that you don’t file for bankruptcy as this can definitely affect your credit rating.