Defining Bankruptcy
Considered to be a hot topic by some and a grim reality by others, bankruptcy is a serious issue that many people around the world find themselves having to deal with. A large number of people live in fear of bankruptcy, and even more live with a number of misunderstandings and half-truths that prevent them from knowing exactly what bankruptcy is and how it works. Before making decisions about whether or not to file for a personal or business bankruptcy, it’s important to take some time and research both what bankruptcy is and what it isn’t… and to see what alternatives to bankruptcy might exist.
The information provided here isn’t meant to answer all of the questions that you might have concerning bankruptcy, but it will hopefully help you to find some of the answers that you need and get you that much closer to making a very important financial decision.
What Bankruptcy Is
As the name might imply, bankruptcy is the process of declaring yourself or your business legally bankrupt… in other words, you’re in debt to the point that there isn’t really any hope of recovery. Bankruptcy is a legal process that can take some time, since the court will have to appoint an individual to sort through your debts, recommend some debts for discharge (meaning that they don’t have to be repaid), and help set up a plan to have other debts repaid by a direct withholding from your paycheque.
A variety of different types of bankruptcy exist depending upon where in the world you live, though most have pretty much the same purpose. It can take several years before a bankruptcy is discharged, during which time new credit lines are nearly impossible to get if they are legally allowed at all.
What Bankruptcy Isn’t
Unfortunately, many people rush into bankruptcy thinking that it will solve problems that it isn’t designed to. Bankruptcy isn’t a “quick fix” to any financial problems, and it won’t leave you with a clean credit history after it’s discharged, either… it actually does the opposite, since most creditors don’t want to do business with someone who has recently discharged a bankruptcy.
Additionally, certain types of debts such as alimony payments, child support payments, and back taxes that are owed aren’t discharged by a bankruptcy; they will still be due even after the bankruptcy itself has been discharged.
Alternatives to Bankruptcy
Before deciding to file for bankruptcy, you should take a little time to investigate other alternatives. If you think that you have enough self-restraint to do without some luxury items and manage your own finances, you might consider regulating your repayments yourself and trying to negotiate with your creditors.
If you are unable to handle this, you might want to consider getting an attorney, an accountant, or someone that you trust to take over your finances temporarily to assist you with this. You might also want to look into consumer credit counseling services, which perform these same functions as a business service.
Where to Find More Information
Since it’s impossible to cover every aspect of the topic of bankruptcy and bankruptcy alternatives in the scope of this article, it’s recommended that you consult a local attorney to find out what the bankruptcy laws in your area are and how they might affect you and your filing. You should also look into local bankruptcy relief programs in order to see what other alternatives might be available to help you avoid filing bankruptcy if possible.
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