Either you’re a business or an individual, bankruptcy is a serious and scary proposition. In fact, it doesn’t spare anyone from experiencing it. Even the seemingly solid business giants who used to dominate the market can still tend to go bankrupt.

If the seemingly unthinkable happens, it’s crucial at this point to think about your options before proceeding. You need to know the essential things to do, as well as how you initiate the filing process. Here are the things you need to know when applying:

When filing for bankruptcy, you have to know which particular type of bankruptcy you’ll be filing for. You have two options- filing for Chapter 7 or Chapter 13 bankruptcy.

Chapter 7

Chapter 7 bankruptcy is a form of bankruptcy that will discharge you from all of your debts. Commonly referred to as “straight bankruptcy,” this liquidates your assets to be able to pay off your debts. What happens is that all the cash from these assets is distributed to your creditors.

You will have to wait it out for four months. By then, you’ll receive a notice of discharge. Take note that your record for bankruptcy will stay on all your credit reports for an entire span of ten years, and will greatly affect your credit score.

For some filers of this type, it offers them a fresh new page to start over. However, again, keep in mind that all your assets are taken to pay for the banks and credit card companies. This type of bankruptcy might not be for everyone.

Chapter 13

If you belong to a group of people wherein you still want to keep some of your assets or properties, then you should consider filing for a Chapter 13 bankruptcy. Also known as “reorganization bankruptcy”, this allows people to pay off their debts in a period of three to five years. If you’re an individual with a predictable income that’s consistent annually, Chapter 13 has a grace period wherein all debts that remain in the grace period are discharged.

The beauty of this is that once this is approved by the court, the creditors by then stop contacting the debtor. You can then keep your possessions and start paying off your remaining debts over the incoming months and years.

Declaring bankruptcy

Declaring bankruptcy can be a scary prospect. However, it’s necessary. It also gives you a kind of emotional relief. Creditors from banks and credit card companies, by law, will stop contacting (or even harassing you) once it’s already approved in the court. If you’re in a multitude of debt right now, and you’re on the brink of financial ruin, it’s time to do something about it. Filing for bankruptcy will not immediately solve everything at this point, but it can provide a solution.

It will give you a fresh perspective as you tackle how to pay off your debts in the months or years to come without the stress of ignoring the ringing phone and talking to angry creditors. At this point, it’s essential to seek legal counsel of an experienced bankruptcy lawyer from Want a Fresh Start, LLC can help you with whatever your current financial situation is right now.