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Important Things You Need To Know Before Filing For Bankruptcy

The aftermath of the COVID-19 Pandemic saw a string of businesses file for bankruptcy. The United States saw many B2B businesses including, FTK Worldwide (Jewellers), Contact Transport (Logistics and Supply), and others opt for the bankruptcy route. Legal experts are of the opinion that no two bankruptcy cases are the same. They differ in terms of their exposure, risks, legalities, and the court judgment. Even if two companies file for bankruptcy under Chapter 7, their judgments and orders can be different. In this article, we speak to a leading bankruptcy Birmingham law firm that specializes in these issues. we ask them about some important things businesses and their owners need to keep in mind before filing for bankruptcy. List of Important Things you need to know before Filing for Bankruptcy 1. Chapters 7 and Chapter 13 are Important for Individuals and Businesses Legal experts suggest that solopreneur ventures and sole proprietorships that are individual-centric should go for filing bankruptcy under Chapter 7. This puts a stay to debt and credit obligations and allows individuals to even retain control over their property. Businesses that are well-established should opt for Chapter 11. This helps in keeping the business entity alive and allows for a payment restructuring plan that works to ensure complete repayment over a period of three to five years. 2. Hiring Legal Help is of High Importance It is important to understand that individuals or businesses looking to file for bankruptcy should always avail of expert legal help. If you are trying to use Google to do all the paperwork, you might get into serious trouble in the near future. Bankruptcy laws are incredibly complex and technical. In particular, Chapter 7 allows liquidation of debt to take care of financial obligations and absolve the individual from repayment. All collection attempts must stop. Subsequently, a bankruptcy trustee collects non-exempt valuable assets and sells them to pay off debt. The law discharges eligible debts, such as credit card loans, medical bills, and old utility bills. So, you need an experienced bankruptcy attorney to help you fend off the debtors, and work with the courts and the banking institutions. At the end of the day, you do not want criminal proceedings to be initiated by any of the parties. You can hire an expert in your area, such as a Florida Chapter 7 bankruptcy lawyer. A bankruptcy lawyer’s job is to help you overcome debt, so they’ll guide you through the process by offering advice or assisting you in filing for bankruptcy protection. 3. Bankruptcy does not mean All Debts go away If you were under the impression that bankruptcy is going to help you walk away scot-free think again. Legally, the following are some areas where bankruptcy will not be able to help you- Alimony Payments Student Loans Taxes on Luxury Items Taxes Child Support Payments All the above-mentioned areas and payments are not something that the court can give you relief from. If you miss your payments or taxes, new legal cases can be brought up against you in a court of law. The punishment and legal repercussions for the same will be different. For this reason, it’s a must to talk to an experienced attorney and a personal financial advisor who can help you determine other options for addressing these problems. Social workers and community leaders can also help. The government and private sectors offer programs for citizens needing financial and social support services. They’ll help you get through difficult times, so don’t hesitate to consult them. 4. Your Credit Score will get Affected Post-Bankruptcy According to leading legal experts, ten years is the period where your credit score will carry the blemish of your bankruptcy declaration. If you are looking to get loans or credit during the period, the same might get very difficult. You need to be prepared to address the credit score. Some lending companies may offer you a personal loan. But the interest rates are high. You can take the risk to recover gradually from poor credit standing. However, you’ll have to make sure that you pay your loan on time. Fortunately, there are some professional services that have come up in recent years that can help you improve your credit score within a short period of time. If you want to get back in the game, you can always avail of such services. 5. Bankruptcy can help you give Yourself a Fresh Start in Life and Business- It can be stated that most businesses that suffered because of the pandemic did so for no fault of their own. In such instances, legal experts suggest that bankruptcy can be a sound tactical and strategic decision that can be taken by businesses and individuals. Banks, lending institutions, and even the judges that will be hearing the case are already aware of the drastic and negative economic fallouts of the pandemic. In fact, there have been cases, where the banks have discussed with lenders and worked out a positive restructuring plan to help individuals and businesses affected by the pandemic. The Bottom Line Filing for bankruptcy can probably the single hardest decision you would have to take in your entire life. However, rather than make the decision an emotional one, it is best to exercise reason and proper judgment and take help from an experienced legal attorney to find your way. Read Also: Debunking 7 Notorious Bankruptcy Myths What are the types of debt that can be discharged in bankruptcy?