The term bankruptcy sends shivers in most people's spines. Most people think that they may lose their property when they file for bankruptcy. However, filing a bankruptcy can be a long-term solution to the debts you are unable to repay in time. It is highly recommended that you visit a finance expert before you file for bankruptcy.
You’ll have to prove to the court that you can’t repay back the debts and you have undergone counseling from an accredited credit counselor. Different types of bankruptcies have various repercussions for the petitioners. Supposedly, you have met all the requirements; you’ll select the type of bankruptcy to file.
Chapter 7 Bankruptcy
This is the best option for people and corporations that have a limited number of assets. You’ll have to liquidate your property to pay the loan. Individuals who have nonexempt assets of high value, such as stocks, should sell them to clear the debt. However, individuals who haveonly exempt property like clothes repay no part in the debt.
Chapter 11 Bankruptcy
Under this type of bankruptcy, businesses are allowed to reorganize themselves to earn profits. The reorganization comprises of new plans of scaling down the cost of production and increasing revenue. The corporation will still continue with its activities without interference as they work on a repayment plan.
Chapter 13 Bankruptcy
This type of bankruptcy is designed to help people and businesses which have a high-income source. You can prepare a repayment plan in installments over a duration of 3 to 5 years. Under this type of bankruptcy, the federal court allows you to retain all your property.
What to Expect When You File for Bankruptcy
There are consequences of filing for bankruptcy even though you get a spotless financial account. For instance, the bankruptcy record stays on your financial reports for 7-10 years. This means that your overall credit score will significantly reduce. Some lenders and financial institutions look into your credit scores before lending money.
After getting a discharge order, your creditors are prohibited from collecting their debts under the supervision of the court. You will have an accredited trustee that will manage your bankruptcy proceedings. Typically, you are required to provide the trustee will all your financial documents, such as bank statements.
On top of that, you will get a chance to regroup and consolidate your resources. You will get relief from lenders that were always contacting you demanding their money. This gives you an opportunity to devise ways of paying the debts.In addition to that, you will be able to protect some of your assets such as your home from the collection.
Finally, bankruptcy affects your capacity to travel out of the country. You can’t travel without permission from your trustee. It’s punishable to go abroad without written permission from your trustee.