As unfortunate as it may sound, filing for bankruptcy or voluntary bankruptcy becomes inevitable if debt exceeds assets. Even though it is the worst thing to happen financially, almost strangely, it remains the best way of addressing financial woes when one is not in a position to pay and come out of debts.
Voluntary bankruptcy (or even involuntary bankruptcy) remains on one’s credit report for as long as 10 years.
As debt involves two parties, the creditor and the borrower, the law has given power to both the parties to file for bankruptcy. In case of voluntary bankruptcy, the borrower declares his incapacity to pay off debts, whereas in involuntary bankruptcy, creditors force the borrowers to file for bankruptcy or face legal petition.
Involuntary bankruptcy is a multi-step process that involves court intervention and a certain amount of debt to enable lenders to force bankruptcy on borrowers.
To ensure that bankruptcy is not misused against creditors, the laws for filing of bankruptcy is quite tough. One has to look for consumer credit counseling through one of the approved entities of the US Trustee within 180 days before filing for voluntary bankruptcy. Once the form is submitted, it is subjected to a ‘means test’ that validates whether a person is really incapable of paying off the debt or willingly avoiding payments.
Typically, voluntary bankruptcy follows this process:
Considering the two types of bankruptcy before filing
Requesting for the bankruptcy form
Mentioning all the eligible dents on the form and submitting it. Filing process costs around $1,500 or even more at times
Though the process looks simpler, there is a lot that you need to be careful about. Ensure that there are no mistakes on the form. There have been cases when furnishing wrong information has led to the possession of homes. You can also consider taking help from a lawyer when filling up the form. A lawyer can not only expedite the whole process, but also share crucial information that is necessary while filing for voluntary bankruptcy.
