Bankruptcy can feel like a terminal diagnosis for your finances. People are incredibly nervous about the process of bankruptcy, and if you don’t know someone who has been through this before then you might not even have a frame of reference. What is life like when you have been declared bankrupt? What sacrifices are required and will you be shackled to different rules and restrictions because of the fact you have declared bankruptcy?
Bankruptcy is a tool to use when times get incredibly difficult. You might reach a point of no return where the debts are spiralling out of control or not even being able to make the minimum repayments for all of your debts. In some cases, bankruptcy is not just the next step for people to take to repair their finances but it can be quite liberating. It’s not all perfect, but plenty of people have been bankrupt and recovered to the point of being very financially healthy once again.
How to Prepare
If you feel like it is a bit of an overwhelming concept, to declare bankruptcy and move on with your life, the best advice we can give is to prepare yourself properly and with the best possible advice. Performing searches for “chapter 7 attorneys near me” or “bankruptcy lawyers” might bring you a number of different options for those who can advise you on what you need to do to get back on the straight and narrow, and how to best structure and claim bankruptcy so that you can bounce back at some point in the future.
Set yourself up on the best financial footing and develop methods of saving and repairing your credit future. We’ve provided our top tips on carrying on after the bankruptcy is filed, as well as explaining what life will be like.
What to Expect
If you go bankrupt, how will life look? Well, it gives you time to repair your finances as you will not have to repay all of the debts. Some debts, including student debts, will endure even after you have declared bankruptcy, so don’t expect this to be a get-out clause for all of your financial issues.
Assets will be liquidated. This is a part of the process, so if you have valuable assets that can be proven they belong to you, expect to lose these to pay off your creditors. You will need to provide your creditors with notice that this is what will be happening to your debts, too. You can provide proof of your bankruptcy, and keep this handy for the future, as without it, you might end up with “zombie debt” as creditors come back to you trying to claim for debts that have been discharged. You need to be organized, and keep a track of anyone that might come back for money in the future even after you have been discharged from bankruptcy.
You will need to repair your credit rating. A bankruptcy filing stays on your credit report for up to a decade, and you might think that lending is off the table. However, you can gradually repair your credit and therefore be able to borrow small amounts of money. There are certain credit repair cards out there that can allow you to borrow and prove that you are able to handle your finances. Things like paying all of your bills automatically, on time can allow you to improve your credit rating, and in the future after your bankruptcy has been taken off the report, you might end up in a stronger position.
After your bankruptcy it is time to do things differently. You need to become more organized financially. It is time to get an emergency fund, and put away money every month for emergencies. The trick after bankruptcy is to learn to live within your means, and not overstretch. You won’t be able to borrow a huge amount of money, so debts should no longer mount up even after your bankruptcy, but that doesn’t mean that people can’t get in trouble once more with bills and other financial commitments.
Ensure your insurance is updated if you have surrendered property as a part of your bankruptcy. If not, you might find that you are liable for injuries or other issues relating to the property. New properties need to be updated so that the new owner goes on the title. If you get a fresh start then it would be a real shame for an issue like this see you back in financial trouble.
About the author:
Melissa Rivers is a content marketing specialist at The Legal Reps. Years of experience in writing for different resources had led her to specialize in writing for legal areas of prbate, estate planning and bankruptcy.
