Bankruptcy

What to do when filing for bankruptcy

Bankruptcy

Bankruptcy is a touchy topic. By definition it is the inability of an individual or a business to pay their creditors. It can be the result of a series of mistakes by the company or person in question, or it may have been due to unforeseen changes in the economy. Regardless, filing for bankruptcy to keep creditors at bay is a stressful and often intimidating process, but it doesn't have to be.

It's important that those who are filing for bankruptcy follow the rules in order to keep revenue agencies happy and leave the door open for credit repair. Before you file, make there are no other options left to you, because bankruptcy could remain on a credit report for as long as 10 years. But if your credit is already in bad shape, then following these steps could at least limit the stress involved in the process.

Know About Bankruptcy Before Filing

The first thing you should do is consult a credit counselor. Under the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), this is actually a requirement prior to filing for bankruptcy. A counselor could find a different strategy for helping a business get back on its feet.

Those resolved to filing for bankruptcy should then consider the two bankruptcy types: Chapter 7 and Chapter 13. Chapter 7, or liquidation bankruptcy, is the most common, and a means test will be involved as well. Chapter 13 helps individuals organize a repayment plan, but may not be available for businesses.

Legal Advice for Bankruptcy

Not everyone hires an attorney when filing for bankruptcy, but the guidance of lawyers can be extremely useful moving forward. Lawyers who specialize in bankruptcy law can help an individual or a company to better understand BAPCPA regulations, bankruptcy forms and general bankruptcy information.

Of course, it's also important to calculate how much all of this—filing for bankruptcy, the necessary fees, and legal help—will cost. In most cases, a lawyer will charge between $1,500 and $2,000 for aid in a bankruptcy case, and they may require you pay up front for their services.

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