The most common misconception people have about filing for bankruptcy is that it means you’re completely broke. When in actual fact, filing for bankruptcy is just a smart decision on how to fix a tricky financial situation. However, this depends on a host of different factors.
Bankruptcy is not always the best answer when you’re facing a financial crisis, but for some situations, it can be very beneficial. But it’s what’s most important to keep in mind is that the process of filing bankruptcy is complicated and, ironically enough, quite expensive.
If you’re considering bankruptcy as a method of solving your financial woes, here are five realities you will have to face during the process.
1. The Process of Filing Bankruptcy Is Longer Than You Think
So, what does bankruptcy mean, exactly? In short, filing for personal bankruptcy is akin to making a trade-off with the court. Your assets are seized in order to pay off the debts you cannot manage. You are then left with the basics that you need to work, live, and travel.
This sounds simple enough, but the process can be long and complicated and is best managed by a bankruptcy lawyer that is well-versed in this type of financial law, such as Levitt and Slafkes.
Bankruptcy court is also nothing like small claims court where your case is seen and concluded in the same day. When it comes to cases of chapter 7 bankruptcy, this process can take up to four-six months, at least. Cases of chapter 13 and 11 bankruptcy can sometimes take years to conclude.
2. Your Finances Become Public Record
Once the court has accepted your file for bankruptcy, your finances are open for public scrutiny. This means that any member of the public has access to your financial records and can use them against you for any such reason.
Basically, you must file in-depth bankruptcy paperwork known as bankruptcy schedules. This includes your debts, assets, income, expenses, transactions, and more.
3. You Have to be Completely Honest About Your Finances
When it comes to filing bankruptcy, there is no way to get out of full disclosure regarding your financial standing. You’ll need to be 100 percent transparent about the state of your finances before your debts are discharged.
You will have to offer up a list of all your debts, properties, and other assets you own. Complete honesty always works in your favor in bankruptcy court and can improve your chances of a better bankruptcy trade-off.
4. The Discharge of Debt Only Applies to You
Overall, you are looking for a complete discharge of debt when filing for bankruptcy. But bear in mind that this discharge or protection only applies to you, and you alone.
This means that shared debt, in the form of a mortgage, loans, and other forms of debt is not discharged. Therefore, the court can still collect debt from a co-signer on any form of debt that you share.
So it’s crucial that you keep business partners and family members in mind who may share your debt, before filing for bankruptcy.
5. Filing for Bankruptcy Can be Costly
The ironic thing about filing for bankruptcy is that it will cost you more than you think. Even if you are facing a serious financial crisis, you will have to find the money to cover this cost.
Most of the time, this cost hinges on whether you hire a bankruptcy attorney, whether you qualify for a bankruptcy fee waiver, as well as the bankruptcy filing fees.
Expand Your Financial Knowledge Right Here
The process of filing bankruptcy may be complicated, but in some cases, it could save you from financial ruin. You must do your homework beforehand, weigh the pros and cons, and assess whether this is the best financial decision for you and those around you.
Learn how to better manage your finances and grow your financial and business acumen by exploring the rest of this site!