Understanding the Basics: What is Bankruptcy?
Bankruptcy is a legal proceeding carried out to enable individuals or businesses that cannot pay their debts to obtain financial relief. It can give a fresh start by eliminating most debts; and restructuring the remaining ones. However, it’s not without its downsides and it doesn’t cover all types of debt.
Types of Bankruptcy and Their Legal Implications
There are primarily three types of bankruptcy cases: Chapter 7, Chapter 11, and Chapter 13. Chapter 7 involves liquidation of assets to pay off debtors, Chapter 11 involves reorganization of business affairs and assets, and Chapter 13 permits individuals to keep their property and repay their debts over time. Each has different eligibility requirements, processes, and potential impacts on your credit score and public record.
How Filing for Bankruptcy Affects Your Financial Status
Filing for bankruptcy severely affects your credit score. It also stays on your credit report for seven to ten years, affecting your ability to open credit card accounts or get loans with favorable terms. Bankruptcy can affect your work ability as some employers run credit checks on potential employees. Lastly, be aware that while bankruptcy can eliminate most debt, it doesn’t rid you of all financial obligations.
Possible Legal Consequences of Bankruptcy Fraud
Bankruptcy fraud is a federal crime carrying serious penalties, potentially including fines and imprisonment. Common fraudulent activities include concealing assets to avoid having to liquidate, providing false information on bankruptcy forms, filing for bankruptcy multiple times, and bribing a court-appointed trustee.
Post-Bankruptcy: Life After Declaring Financial Insolvency
Life after bankruptcy can be challenging yet it’s a chance for a fresh start. It’s important to begin rebuilding credit as soon as possible after a bankruptcy. Start by creating a budget and building an emergency fund. Be disciplined in using credit, punctual with bill payments, and committed to consistent saving and investing. Pursuing financial education can also be a great way to stay informed and avoid future pitfalls.
Importance of Seeking Legal Advice Before Filing for Bankruptcy
Bankruptcy law can be intricate and confusing. It can also have long-lasting consequences on your personal and financial life. So, it’s extremely important to consult with an experienced bankruptcy attorney who can guide you through the process, inform you of potential alternatives, and help you gauge the timing and type of bankruptcy that you should file for.
