What Is Bankruptcy? A Step-By-Step Guide to Filing for Bankruptcy.

Filing for Bankruptcy

Bankruptcy, to say precisely, is a procedure of federal court that enables the businessmen and customers to repay their debts to the creditors. Once the court grants your filing for bankruptcy, it will set some of your properties on auction to increase the cash. During the entire proceeding, the court will help you in the best possible way. However, it is regarded as the last resort and debt relief order is the most common option.

How to do Bankruptcy Filing?

Filing for bankruptcy requires one to follow a step-wise process, involving form filling. Many websites are offering these forms online. Hence, the job can be done right from the comfort of your home with a professional’s assistance. If your income is too low, the court may free you from paying the fees. Still, while filling the form, you need to pay the court a certain amount.

Once you’ve successfully submitted the form, the bankruptcy court will take the procedure further. Schedule an appointment with the Official Receiver to know whether the order for the case has been made. Answer the questions asked by the Receiver rightly to succeed in your intentions. He may ask you questions related to your financial status like income, pension, assets, and expenses.

How Creditors can Make You Bankrupt?

Yes, your creditors can do that. And, it’s quite common. If you’re not paying the debt to your creditor for a long time, he or she can go to the extent of making you bankrupt. When such is the situation, your creditor will give you a Statutory Demand. This Statutory Demand contains three choices:

  • Pay off the debt
  • Secure debt by utilizing your available assets
  • To settle payment method agreement with your creditors

After 3 weeks of giving you the Statutory Demand, the creditor can submit bankruptcy file against you. In certain cases, the debtors are allowed to keep side the file. It is granted only when there is some dispute concerning the owed amount.

What are the Advantages of Going Bankrupt?

As soon as the bankruptcy case is over, you can start over with a clean slate. Many advantages one can enjoy by going bankrupt. Some of them are:

  • You will feel less burdened because you won’t deal with the creditors directly.
  • You will be allowed to keep some household essentials along with a specific amount of money.
  • Creditors won’t be able to take additional assistance from the court when your bankruptcy order is going on.
  • Generally, the money you owe to the creditors are canceled.

Prior to applying for bankruptcy, make sure there is sufficient cash in your hands to deal with the daily expenses. It’s because your bank account swill be frozen when the order is made by the court. After the acceptance of the application and the order of bankruptcy is made, Official Receiver will start to control all your money.

Your Official Receiver will define your situation to the creditors. A report will be sent to them explaining your financial situation. The court will sell some of your assets to repay the debt. Details of bankruptcy along with your name are published on the bankruptcies of national register. This national register of bankruptcies is known as the Individual Insolvency Register.

Which of Your Assets Will the Court Put on Sale?

According to the rules and regulations of bankruptcies, all the priceless items of the owner is keep aside for sale. Usually, these items are inclusive of costly electrical devices, antique items, luxury cars, and many more. However, the products of daily use such as clothing, furniture, bedding, and other household goods are exempted to be put on sale in compliance with the rules of bankruptcy.

Your home may also be put on sale, but it will not be treated as your other valuable items. From this property you own, the amount of equity can be released. In accordance with the rule of bankruptcy, one year time will be granted to you to find another shelter. In case, you are the sole proprietor of your house, the whole value of equity will be given to the Official Receiver.

Panic, confusion, and stress can be observed in a person undergoing financial crisis. Before filing form, you need to determine whether bankruptcy will work for you or not. Contact an experienced bankruptcy attorney to know how the court can help you in getting rid of the situation.

As compared to bankruptcy, debt relief order is cheaper. If your earnings, assets, and debt is below a specific amount, you should apply for the latter without a second thought. Pick the right option and before deciding, go through the advantages and disadvantages of both the options available so that you can freed yourself from the situation in a hassle-free and legal way.