It's never an easy decision to make, but bankruptcy lifelines can give you a second chance. Even though no one likes to go down this road, it's a necessary choice for a lot of people that feel like they're drowning in unending debt they can't afford. Amidst the COVID-19 pandemic, many companies were forced to file for bankruptcy because they halted operations and can’t make ends meet. The process can be scary and overwhelming for a lot of people, but you can go through every step perfectly if you understand what to do.
Read on to learn how to handle a bankruptcy situation in the most hassle-free way possible.
When Is the Best Time?
Many people wonder if there is an ideal time to declare bankruptcy, but there isn't a definitive answer to that question because it varies depending on the situation. The ‘best’ time is based on the size of your debt. Some people see that if their debt is so big that it would take them over 10 years to pay it off and not live their lives normally, then that is the best time to declare it. Don't pressure yourself too much by overthinking it or delaying it too much. If the odds aren't in your favor, then this is the perfect time to take the bankruptcy route.
The Guiding Hand You Need
You will need a guiding hand to help you with the process of bankruptcy and make it as smooth as possible for you. This is why a bankruptcy attorney can be worthwhile. It will be extremely hectic for anyone to compare bankruptcy lawyers no matter where you live, even if you live in San Diego. The financial distress because of the COVID-19 outbreak can make the filing process for bankruptcy extremely difficult too, and you need to learn how to choose a bankruptcy attorney based on different qualities that you should look for. The most common quality that any Californian bankruptcy attorney would have is empathy. It's crucial because this isn't an easy decision and you need someone that can hear and understand your situation. You need a lawyer that shows the desire to help and has the willingness to listen to your side of the story. Also, having a great bedside manner when they ask you questions can make you feel comfortable. This is the type of service you'll be satisfied with.
Prepare Your Documents
Most people don't know the important documents needed when filing for bankruptcy, not to mention that you'll go through pre-filing and post-filing processes that need a lot of documentation. Consult with your attorneys or insolvency specialists to understand what will be needed and how to prepare it properly. You'll need to make a plan to take each step properly to keep the process organized. All the paperwork that needs to be filled out should be appropriately done so. Any irregularities or failed tax return filings will slow the process down and set you back significantly. This is the last thing you need because you don't want to spend more time on this matter than you already will.
People should never procrastinate when it comes to the bankruptcy process. It will only delay the process and would make you feel a lot worse. It's easier said than done, but you should try to avoid procrastinating in the middle of the process because it will increase your stress, pressure, and feelings of shame. Don't make it harder than it already is for you and follow each step accordingly with your trustees and attorneys to finish everything promptly.
Don't Shut Yourself Off
Never shut yourself off during this phase. You need to understand that you're not alone and the stress that comes with bankruptcy is too big to bear alone. You will need the support of your family during these tough times. So, you should talk with them to blow off some steam. Your mental and emotional health during this process should be in order because the process will be a lot harder without their support. Even though you might feel ashamed, your family will still be by your side no matter what. Nobody is perfect when it comes to managing finances and you can start over soon with this insolvency route. But to do so, you need to be emotionally stable, strong, and supported.
Understand Each Chapter
People need to understand each chapter of bankruptcy to know which one to file. Choosing correctly will increase your chances of approval because filing the wrong chapter, that doesn't apply to your situation, will get declined by the court and waste your time.
Insolvency has four main chapters listed below:
1. Chapter 11
Most businesses file for this chapter if they don't want to liquidate their assets. They would restructure the company and reorganize everything to take care of the portions of debt remaining after they're forgiven for a significant amount of the principal debt.
2. Chapter 13
This is similar to chapter 11 but it's more appropriate for individuals. Their attorneys or trustees would come up with a 3 or 5-year plan to help them pay the remaining portion of the debt that is easy to handle. But the rest of the debt would be waived and you won't be legally obliged to pay it back.
3. Chapter 7
This is for individuals and businesses that will liquidate their assets and property to pay off debts. But these liquidation processes don't apply to your house, cars, retirement accounts, or any personal asset you don't want to liquidate.
4. Chapter 12
You should file for this chapter if you're a farmer or fisherman. It's very limited and only available to specific applications and situations that would benefit the operations fishermen and farmers go through.
When it reaches the point where you can't keep up with the payments and barely have enough to survive, filing for bankruptcy is your best choice to not have any legal requirement to pay the full debt. Think of it as your chance to press that reset button and start over. So, whether you're an individual or a big business, you can get the salvation you need when it comes to overwhelming debt and collapsed finances.
Published by Charlesa Gibson