Facing Bankruptcy: What to do When in Financial Distress
Are you facing bankruptcy or financial distress? Do you have creditors calling about outstanding bills daily? If so, do you know how to get out of the financial situation you find yourself in?
Bankruptcy affects people from all walks of life irrespective of marital status, age, income level, and gender. 2016 statistics show that 51% of the total US population are women. And of these, 52.5% of women are more likely to file for bankruptcy than men.
However, before we discuss what to do in the event of looming bankruptcy, let’s look at a definition of bankruptcy and financial distress. And then we will look at ways to survive the event.
Bankruptcy and financial distress: What, why, and how?
Investopedia defines financial distress as a “condition in which a company or individual cannot generate revenue or income because it is unable to meet or cannot pay its financial obligations.”
Some of the reasons for this scenario include rapidly rising costs versus reduced or stagnant income. It is also critical that an individual or company does not ignore the signs of financial distress. Otherwise, declaring bankruptcy will be the only alternative.
What is bankruptcy?
According to www.investopedia.com, “bankruptcy is the legal proceeding involving a person or business that is unable to repay outstanding debts.” Thus, because filing for bankruptcy is a legal matter, it is vital to hire a bankruptcy lawyer in Toledo to ensure that the application process and documents filed are correct according to the laws applicable to federal and state law.
Why file for bankruptcy?
At this juncture, it is vital to note that filing for bankruptcy is a last resort. It is essential to attempt to remedy the dire financial circumstances by reducing costs, reviewing business plans, and restructuring debts where possible.
However, these measures do not work; the next step is to declare yourself or your company insolvent. Insolvency translates into the fact that you, or your company, can no longer meet the minimum debt repayment figures. Thus, the next best thing to do is to file for bankruptcy.
How to file for bankruptcy?
As highlighted above, filing for bankruptcy is a legal process. There are essentially two ways you can go bankrupt.
- Your creditors ask the court to declare you or your company bankrupt.
- You voluntary file for bankruptcy on behalf of yourself or your company.
There are several ways to file for bankruptcy, each with their pros and cons. Thus, let’s take a brief look at the more standard ways.
- Chapter 7 bankruptcy: This is also known as straight bankruptcy. It liquidates all of your assets to pay as much as your debt as possible. The negative is that your credit record will indicate that you were declared bankrupt for ten years after the fact. Even though the chapter 7 bankruptcy process is relatively quick and offers a fresh start, the other negative is that you will lose almost all, if not all, of your assets.
- Chapter 13 bankruptcy: Should you wish to retain ownership of your property after the bankruptcy declaration, it is better to file for chapter 13 bankruptcy. This process is a reorganization process and allows you to pay off your debts within three to five years. It is essentially a grace period that will enable you to pay off your debts without being contacted by creditors, debt collectors, and liquidators.
Filing for bankruptcy is never a simple matter or an easy process. However, there is often no other alternative. Therefore, it is best to hire a legal expert to help navigate this challenging time.