Is There Life After Bankruptcy?

Despite what many lawyers may say, bankruptcy is NEVER a minor inconvenience. It is also never quick. Guess who gets paid before any of your creditors do? Your lawyers. Before you decide anything, check out our guide to whether or not there is business life after bankruptcy.

1. Chapter 7 Bankruptcy vs. Chapter 13 Bankruptcy

Many differences lie between these types of bankruptcy. In short, Chapter 7 is a type of liquidation that will erase most of your unsecured debts, including credit cards and medical bills. You would not need to pay back your debt through any repayment plan. However, Chapter 7 bankruptcy has specific income requirements. Those who don’t meet them should file Chapter 13 bankruptcy. It is a reorganization designed for applicants with enough income left over every month to pay back small portions of their debts through repayment. However, Chapter 13 does have benefits such as the option to catch up on a delinquent mortgage and remove liens from property.

2. Debts Bankruptcy Doesn’t Cover

You may have more in debt than what is listed above. Unfortunately, neither type of bankruptcy can solve every debt you have. Some are not solvable by bankruptcy. One such example is child support or alimony. These are court-ordered payments that are not covered by bankruptcy. Taxes and government penalties are another debt that bankruptcy may not be able to help. However, if properly filed, taxes due for less than three years may fall under the umbrella. Student loans can also be challenging to be dismissed with bankruptcy unless you can prove your repayment is an “undue hardship.”

3. What You Have to Give Up for Bankruptcy

The financial recovery process can be long and difficult after filing. You and your court-appointed trustee will meet with your creditors and tell them about the bankruptcy. Before this, you will have to sell all your non-exempt assets, including tangible items such as jewelry, investments, etc. You will most likely get to keep your car, furniture, and other belongings up to a specific value set by the law.

Also, don’t forget, you must pay your lawyer or lawyers.

4. Financial Life After Bankruptcy

So you’ve paid all your bankruptcy costs, and you’ve eliminated all debt allowed. What now? The bankruptcy will remain on your record for years to come, ordinarily ten years. Your credit score is sure to dive, making it difficult to obtain any loan. You may qualify for some types of loans, but the terms and interest rates will not be as favorable as they used to be. Those of you who lease your homes may find difficulties as well. Many landlords require background and credit checks at the time of the application. The bankruptcy will show up on there, forcing you to enlist the help of a family member or friend to help co-sign a lease.

Those of you who negotiated a repayment plan will have to stick to it. There is no bankruptcy after bankruptcy. This plan requires maintaining a steady income, timely paying your bills, and keeping a reasonable amount of cash in your bank accounts. The strategy will help build your credit score and help you when you are ready to take out a loan. Finally, yes, your spouse (if you have one) will be part of the bankruptcy in all matters.

A few questions to ask yourself before filing for bankruptcy:

1. Do I own or lease my home?
2. How long do I want to live there?
3. Will my current car last another 10 years?
4. What is the cost of the bankruptcy verus the cost reduction I can get on my own?

We also recommend you read a bankruptcy blog to get real stories from people who have lived through it. Try to find someone in your state, as each one has specific and varying laws.

Other Bankrupcty Alternatives

Just because you have tons of debt doesn’t mean bankruptcy is the only option. There are others you should also consider such as:

• Debt consolidation.
• Transfer of credit card balances.
• Contacting credit card companies directly to negotiate a new debt.
• Contacting medical providers and others directly to negotiate a new debt.
• Home equity loan or HELOC.
• Tapping into savings or retirement.

We recommend using this debt calculator from Bankrate to help determine if which, if any, of these options are right for you.

Speak With a Professional Before Taking Action

Remember to utilize a consultant or coach before taking any permanent course of action. Expert advice may appear daunting, especially when cash reserves are low. Experience shows the cost of expert advice will pay for itself in the long run, especially in terms of creating best practices and processes that will negate the situations that caused the bankruptcy in the first place. Understanding the reasons for bankruptcy is vital to reversing a negative trend. The right consultant or coach can bring SWOT, PEST, DiSC, John Maxwell, and other analysis tools to remedy many situations.

In Conclusion

The causes and effects of bankruptcy are diverse, and every business hardship is unique. Do you have any questions about the benefits and downfalls of bankruptcy, along with life after bankruptcy? Feel free to share your comment below, and we’ll do our best to answer.

Feel free to use the form here to get more information on bankruptcy and any other business consulting help. Many business owners have found our insights and analysis helpful. You might also.

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