Declaring bankruptcy is always an unpleasant thing to consider, but it may be the only way that you can escape crippling debt that is impossible to pay off. If you need to declare bankruptcy, there are some things you need to know.
1. Be prepared to have your finances exposed
When you file, you will need to appear at a meeting of all of your creditors in court. A bankruptcy trustee will ask you questions about your finances, and creditors can ask questions as well. You will have to be completely honest and list off all property, assets, creditors and debts. Otherwise, you face potential fines and jail time.
2. Read through the paperwork
Bankruptcy proceedings involve filing a lot of complicated forms, and you should take as much time as you need to properly understand them before taking the final step. The one form you should look at the most is the statement of financial affairs.
3. Never file for bankruptcy without an attorney
It'll cost you a little more, but a good bankruptcy attorney can help you avoid needless seizures and help you navigate through the maze of laws that are tied to bankruptcy. Be completely honest to your lawyer and to the trustee that's assigned to you. If hiring an attorney is difficult because of your financial difficulties, then you may file a petition for a fee waiver with the court.
4. Remember that bankruptcy is personal
This may seem like an odd lesson, but bankruptcy protection does not actually eliminate debt. If you're declaring bankruptcy because of a loan, then creditors can still go after other co-signers that are on that loan.
5. Don't pay off certain creditors
Many people will try to pay off some debts before declaring bankruptcy. Doing this will ruin your case while using credit cards to do so is considered fraud. You'll need to consult your lawyer if you've already paid someone off.
6. Bankruptcy can take a long time
The average chapter 7 bankruptcy lasts four months while the average chapter 13 can last up to five years. You'll have to be prepared for a long slog if you want a bankruptcy discharge.
You'll need to weigh these facts and others before making a final decision. If you feel that you're prepared, then consult a lawyer to begin the process. The process is hard, but it can help you start anew.
Information credited to AC Waring & Associates Inc., a bankruptcy trustee in Edmonton.