People need to file for bankruptcy when they can no longer afford to pay back the money to their creditors. It is a legal action that declares that you can no longer fulfill your promise to pay back the money that you borrowed. By undergoing the legal proceeding, you are absolving yourself of your debt and after a bankruptcy has been discharged, the lenders loose all legal rights to recover the money from you or file a law suit against you for payment.
However, this does not mean that you will not have to pay back the creditors at all. A debt repayment plan can be a part of a bankruptcy filfing and depending upon your financial situation some of your assets may be absorbed by the court as payment to creditors (Chapter 7) or you may be required to make a repayment plan, if that is possible for you at all (Chapter 13). Read on to learn what to expect when filing for bankruptcy.
If you’re expecting bankruptcy filing to be a magical solution where your debts will immediately go away as easy as swishing a magic wand, then you are probably in for a huge surprise. Filing for bankruptcy involves a lot off paperwork. Bankruptcy laws are complicated and every situation is different from the other. The very first thing that filing for bankruptcy involves is getting good legal advice. Once you have good legal counsel you generally do what they tell you to do. They may ask you to stop making payments on your debts immediately. This makes sense since you’re going to be filing for bankruptcy and try to get the debt charged off anyway. Continuing to make payments on the debts does not make much sense.
Filing for bankruptcy will involve you haven’t take time off from work to go to meetings with your lawyer. In case of a chapter 7 bankruptcy you will need to spend time with the trustee appointed by the court to go over your finances and assets. This will be followed by a meeting with your creditors where a disbursement of the assets is decided upon.
Notifications of the bankruptcy filings also usually appear in the newspaper. However, it is most likely that your friends and family do not go through this section of the newspaper. Unless your friends are also your creditors and receive notices of the bankruptcy in the mail or you are someone very popular your bankruptcy filing will not be very big news. In fact you may just be surprised as to how many people you know who have filed for bankruptcy sometime in the past.
During the time of filing you will need to go to the courtroom. The courtroom is not a pleasant place to be at nor does it have to be a very scary place. The real courtrooms probably won’t look like the ones that you see on TV. It could very well be a regular room with folding chairs. During the time of your filing there may be a lot of people in the room. Most of them will be waiting for the loan turn and are not interested in your case. Your creditors or their representatives may be present but they are not allowed to disrupt the proceedings.
The court proceedings are quiet and orderly. The judge and the trustee may ask some questions and have a look at your paperwork. Your actual time in court may be either very short or may take weeks or months before it’s over.
Once the court has reached decision and your case is resolved you’ll get to find out how you’re supposed to proceed with discharging your debts. If it is a chapter 7 bankruptcy you’ll get to know which one of your assets are to be absorbed by the states to pay of the creditors and which will be exempted. In many cases almost all assets will be exempted from absorption by the state. If it is chapter 13 bankruptcy you will be informed whether the repayment plan you have submitted for discharging debts has been approved or not approved. The creditors will have a right to raise objections to the repayment plan during the proceedings.
Once your bankruptcy has been discharged you’ll be free to start over and rebuild your financial life just like so many have done before you.