Perhaps the most common question received by the Alabama bankruptcy attorney at the Semmes Law Firm is: should I declare bankruptcy? There is often no one right answer, as whether to declare bankruptcy is a personal decision based on a wide variety of factors. Our attorneys can help you understand the legal process and pros and cons of declaring bankruptcy; however, ultimately it is your decision.
The following are a few general tips to help you analyze the bankruptcy decision:
Understand the Basics of Bankruptcy
The goal of the bankruptcy process is to give personal and business debtors, who feel overwhelmed by their debt, a way out or a second chance. It’s important to know that there are different types of bankruptcy, and choosing a type can be as difficult and important of a decision as choosing whether to declare bankruptcy at all.
Bankruptcy can broadly be divided into two categories: liquidation forms and reorganization forms. Under liquidation forms of bankruptcy like Chapter 7, the goal is to sell off as many assets as possible to pay off debt. Under reorganization forms like Chapter 13 and Chapter 11, debtors are given greater freedom to reorganize their debts, while still paying creditors on a schedule.
After the bankruptcy process is complete, most debts will be wiped out. However, there are exceptions, such as student loans. If there is a particular debt with which you are concerned, be sure to identify and ask about it when speaking with a bankruptcy attorney.
Take Ego Out of the Equation
It is very difficult to do, but when considering bankruptcy, try not to think about what friends and family say and don’t think of it as a personal failure. Many individuals and businesses have declared bankruptcy and gone on to have successful careers and legacies.
Understand Credit
One of the most common reasons cited for not declaring bankruptcy is credit. It is a common misconception that if you declare bankruptcy, you will never be able to procure a car or home loan or obtain a high credit score. This simply isn’t true. Declaring bankruptcy does negatively impact your credit, but only for a period of time. Though legally bankruptcy can typically be reported for up to 10 years, it typically only stays on credit reports for 7.
The other reality is that if you or your business is declaring bankruptcy already, there’s a good chance that one or more bills are delinquent and your credit report and score are already being damaged. Bankruptcy could be the only viable way out from under this debt to actually improve your credit.
Ask for Help
If you’re still having trouble determining whether bankruptcy is the correct decision, contact an attorney who can provide objective advice and help you through the process if you decide to declare. While there is a cost associated with engaging an attorney, that cost is often outweighed in the long run. Additionally, payment options are available to help ease the financial burden of declaring bankruptcy.
If you want to learn more or begin the bankruptcy process, contact the experienced attorneys at Semmes Law Firm today. We are prepared to help you each step of the way.