Bankruptcy serves a distinct and important purpose in the modern world, and it’s slowly shedding old negative associations as more and more people come to understand how it works and why it exists. In fact, over a million people a year file for bankruptcy in the United States, seeking the protection of the court while they put their affairs in order.
The fact that so many people have chosen to pursue bankruptcy as a final solution to their financial problems should not, however, give the impression that bankruptcy is no big deal or can be a casual solution to reckless spending. Bankruptcy is complex and has a long-lasting effect on your life; it should never be entered into lightly. Here’s what you need to know:
- There are two main kinds of bankruptcy: Chapter 7 has the ability to erase your debts completely, and it removes you from contracts with creditors. Chapter 13 involves a five-year payment plan before your debts are completely removed. Each has specific advantages and disadvantages – know them before you file.
- Don’t hesitate. While bankruptcy shouldn’t be an option while you still have resources, you also shouldn’t wait until disaster has already struck.
- Don’t commit fraud. If you think taking cash advances on your credit cards or transferring assets into a relative’s name just before declaring bankruptcy won’t be noticed by the courts – think again.
- Hire an attorney. An attorney who specializes in bankruptcy law is essential – don’t try to go it alone. Bankruptcy law is complex and your finances are complex. Whatever you think, you need a qualified expert on your side.
Bankruptcy can save your retirement funds, your home, and other assets while giving your creditors a chance to salvage something from the loans made to you – this is an essential aspect of the modern world and shouldn’t be treated lightly, for any reason. The better prepared you are for bankruptcy, the better the process will serve you.
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