You’ve probably heard the term “bankruptcy” before, but you might not know exactly what it means in detail. In this guide, we’ll break down what exactly a bankruptcy is and go into some of the reasons why people file for bankruptcy.

The five phases of bankruptcy

Bankruptcy is a process that allows people to get rid of their debts, depending on the circumstances. There are five very important phases in this process. These five phases are: 1) Petitioning the court 2) Disclosure; 3) Debtors Meeting 4) The Hearing 5) The Plan

How to tell if you’re going through a Chapter 7 or 13 bankruptcy

Many people go through a Chapter 7 bankruptcy. This type of bankruptcy is the most common kind and it means the debtor’s average monthly income is less than their expenses. A Chapter 13 bankruptcy is when a debtor agrees to repay their debts over a period of three to five years, but without liquidating property or selling assets.

Who’s eligible for bankruptcy protection?

The Bankruptcy Code is a federal law that protects individuals and businesses from creditors who may try to place unfair financial burdens on them. Technically speaking, the first step in seeking protection under the Bankruptcy Code is filing for Chapter 7 bankruptcy. This means that all of your debts will be listed as “discharged,” or wiped out, according to their terms. A Chapter 13 bankruptcy would allow you to restructure your debts over a 3-5 year period with a repayment plan, which includes making regular payments to lenders.

What are the consequences of bankruptcy?

Bankruptcy is a legal proceeding that allows a person to regain control of their financial life. The entering of bankruptcy doesn’t mean the end of your financial troubles, though. It has both short-term and long-term consequences that must be considered before filing for bankruptcy.

Preparation steps

To know where you stand and how to prepare, here are the steps you should take:

1. Start by gathering information about your finances and your debt.
2. Create a budget that you can stick to.
3. Take the time to understand what bankruptcy actually entails, as well as its benefits.

How to make your plan effective

The first step to filing for bankruptcy, if you are interested in doing so, is making a budget. Our budget for the month was $2,400 and we spent around $2,600. It’s important to have a plan that proves you have been trying to save money but your expenses just keep going up. We included all major bills, groceries and other spending categories. That way, it would be easier for the bankruptcy court to see the plan.

Bankruptcy FAQ

The most common question that people ask about bankruptcy is how long does it take. The answer to this question is not a straight forward one because each case is different and the process can vary from a few months to several years.