What to Expect During the Bankruptcy Process and How to Prepare Yourself
Are you going to apply for bankruptcy? It is the worst nightmare for any business and people try to avoid it at all costs. However, sometimes things don’t turn out the way you want them to. But what is bankruptcy?
According to ResearchGate, “Bankruptcy is a constitutional right of protection against creditors. It allows consumers and businesses to make a fresh start when they owe so much money relative to their income that they cannot afford to pay their debts.”
In this article, I’ll tell you what to expect during the bankruptcy process and how to prepare yourself.
Finding An Attorney
You can’t deal with it on your own, you would need professional expertise. Your first step has to be hiring a certified lawyer who can handle the whole situation for you. With their support, you can protect your assets. They will also simplify the entire process, breaking it into easily digestible steps, so you don’t lose your head.
Explaining the process of filing for bankruptcy to you will help alleviate a lot of the anxiety that stems from the uncertainty of bankruptcy claims, too. To find a lawyer, prioritize experience above everything else.
But, whoever you are hiring must be qualified and reputed. Because one small mistake can turn out to be fatal for you. Take recommendations or read their reviews online.
Filing for Bankruptcy
Filing for bankruptcy isn’t an easy task. It’s complicated as you’ll have to deal with a lot of pressure and legal procedures. Without the help of a professional, you’ll be done for. A lawyer will prepare and send the necessary documents to support your case.
Because of the heavy reliance you will have on your lawyer, you need to make sure you find one who is experienced and knows what they are doing. You can, as mentioned above, ascertain a lawyer’s experience by reading their reviews.
By ensuring that the lawyer who represents you has filed bankruptcies for other people in the past, you won’t have to worry about them making mistakes or misrepresenting your case. They will also be able to submit a detailed petition on your behalf and ensure every single aspect of your bankruptcy claim is properly formatted and addressed.
You might wonder what sectors file for bankruptcy the most. To answer your question, I’m adding a statistic below.
Obtaining Stay
Stay, also known as ‘automatic stay,’ is a legal injunction that prevents your creditors from being able to take any action against you. This means that until your claim has been resolved, you won’t have to worry about anybody coming to your house or trying to seize your belongings.
Thanks to it, you won’t have to deal with the debt collectors. With the help of your lawyer, you’ll get a stay right after submitting your bankruptcy petition. Getting a stay for yourself is possible, but if you don’t meet all the legal expectations, you might fumble your chance and won’t be able to claim it.
Delays in processing your claim form mean you will have to deal with calls from credits, and potentially even debt collection actions, i.e., repo men coming to seize your things.
Meeting with Creditors
Once your lawyer has filed your bankruptcy petition and got you your automatic stay, they will then arrange what is known as a 341 meeting. 341 meetings usually take place between 20 and 40 days after a person has filed for bankruptcy.
In this meeting, you need to be transparent with your investors and answer every question honestly under oath. This way creditors get a better understanding of your situation and if you are lucky enough they will discharge your debt, but that’s exceptional and rare.
It is important to be as honest as possible during your 341 meeting. You also need to take your lawyer with you, so you can avoid saying anything that might incriminate you or get you into trouble. You don’t have to worry, as your lawyer will give you the required advice on what you need to say and what you don’t. But follow the instructions.
Finding a Resolution
Now, after the 341 meetings, it is time to find a middle ground where everyone can work together and find a resolution everyone can benefit from. As mentioned earlier, if they choose to discharge your debt then you wouldn’t have to pay anything back, but they might not work with you again in the future.
Having debts discharged does often come with caveats and rules, however, and it is not usually as simple as just having your debts completely wiped. Keep this in mind, if you got caught lying during your 341 meeting or attempted to deceive your creditors, it would backfire. Your bankruptcy will be overturned, and you will face legal action.
The likelihood is that, if you are caught lying, you will be sued and will have to pay your debts back in full. An alternative to having your debts discharged is that you will be asked to pay them back as part of a repayment plan.
DID YOU KNOW?
In 2023 AIG FINANCIAL PRODUCTS CORP filed for bankruptcy with total liabilities of $37.70 billion!
Preparing Your Finances
After your bankruptcy has been resolved, your lawyer can work with you to prepare your finances. By preparing your finances, this post means entering into debt counseling to prevent yourself from getting into any further debt, as well as budgeting, and learning to manage your money better.
Budgeting is a major step no matter what you are doing, making any significant investment or buying any luxury goods. You need to be responsible, and taking out unnecessary credit cards is not worth it.
A good budget grants you great control over your finances and stops your overspending. You can use free budgeting apps if you are unable to create one by yourself. As well as using budgeting apps, a counselor will allow you to work through any issues you have with overspending, and help you to get your finances back in check.
Bankruptcy can be an extremely stressful process. However, it’s not one you have to go through alone. A lawyer can empower you to sort your debts out once and for all. Find the most experienced and qualified one you can, and pay them to manage your petition and subsequent bankruptcy case for you.
