What Is Bankruptcy?

What Is Bankruptcy?

What Is Bankruptcy?

Elizabeth Warren said among others about bankruptcy: “Bankruptcy is about financial death and financial rebirth. Is the great American story rewritten. We’re a nation of debtors.” While the majority of people believe that declaring bankruptcy is the worst thing can happen, they may need to re-consider. Yes, it’s not the most pleasant situation, but you can extract good things from it. Baby Boomers Financial put together some general knowledge about the term, process, and types of bankruptcy. Check them out. 

What Is Bankruptcy and What Is Its Purpose? 

It’s the legal process and option, for individual and companies to declare themselves as unable to pay off their debts. Its purpose is to give a fresh start to people who are stuck, educate them for a better financial future, and boost the movement in the market. 

How Can I File?

It’s a hard decision to make, that needs lots of thinking, as well as a list with pros and cons for every individual case. If you find yourself ready to declare your pockets as empty, you can contact a bankruptcy lawyer to help you with the process. Before filing your request, you have to sign up for credit counseling, and after the application, you must take debtor education courses. That sounds beneficial, right? Don’t you even think of skipping those, as you’ll need completion certificates in order to be qualified for discharge. Depending on the type of bankruptcy you’re filing for, you can find the form on the website of U.S Courts. If you’re accepted, then your application goes to a trustee, who is going to conduct several checks and evaluate documents, to eliminate any possible attempt for fraud.

Types of Bankruptcy 

There are several chapters of bankruptcy, each one designed for different situations. Briefly, the most common types, are the following: 

  • Chapter 7, known as liquidation bankruptcy. It’s the most common file among non-qualified debtors for the Chapter 13 type and it’s payment plan. 
  • Second in the list, Chapter 13, gives the flexibility to individuals to pay part of their debt within the next 3 or 5 years from their filing. 
  • Chapter 11 works well for both companies and individuals, and restructures their debts.

One way or another, bankruptcy is not pleasant for both debtors and creditors. However, it’s a great option for people who need to restart their credit. Now that you know a thing or two, stay tuned for our next blog post about its pros and cons. In the meantime, let Baby Boomers Financial to repair your credit and help you achieve your much-desired financial freedom. Contact us today, or apply for your free credit review here.