Declaring Bankruptcy: Five Things You Need to Know

If you’re drowned in debt, you may be thinking about a lot of things. How am I going to repay the loans? What about the interest fee? What if I cannot pay it back? How about declaring bankruptcy? Such questions are common and they make the rounds in everyone’s mind. 

If you’re going through the same, you should consider talking to a credit counselor before you officially move towards bankruptcy. In case you don’t want to spend any more money on professional advice, simply have a look at the article below. The following are a few things you need to know before you declare bankruptcy:

It’s a Legal Process 

Bankruptcy is a legal process. It requires legal involvement and you need to go public with it. To begin with, you need to file a petition for bankruptcy as per your federal law. Each state has different laws for bankruptcy. 

Hence, first and foremost, you need to check your state laws and after that, you can file for bankruptcy accordingly. Also, make sure to consult an attorney or financial advisor before you do. They will provide you with a legal picture.

It Wouldn’t Erase Tax

Bankruptcy may settle the debt for you, but it won’t erase your taxes. It only makes tax liabilities go away if there are older than three years, so terms and conditions

apply here. In case of recent tax liabilities, please know that you’ll have to pay them, regardless of declaring bankruptcy. 

Thus, I suggest you calculate your taxes immediately. Once you have the exact figure, you can figure out a way to erase them. Either you can take a debt consolidation loan or ask your friends or family to lend you some money.

It Wouldn’t Remove Students’ Loan 

For those who are burdened with student loans, bankruptcy is not an option. The reason is, bankruptcy doesn’t remove students’ loans. If you have a student loan hanging on your head, you have to pay it to settle it down. There’s no other way. 

For this reason, you must talk to your attorney first as they can suggest several alternatives to handle students’ debt. You can have a side business for extra earning

to pay off your debt or take out a students’ debt consolidation loan.

It May Take Away Your Luxury Possessions 

As mentioned earlier, every state has different laws for bankruptcy. However, just to explain the situation, most countries don’t allow keeping your luxury possessions in case you declare bankruptcy officially. 

Therefore, before declaring bankruptcy, please take notes of your luxury possession as you’ll have to give up most of them once you file the petition.

It Wouldn’t Change Your Financial Situation 

While it is true that bankruptcy will provide you with a fresh start, it won’t change your financial situation. It may sound defeated initially. You may feel low and disheartened in the beginning. 

Yes, you’ll have to work in order to improve your financial situation. You’ll have to take baby steps as they’ll set you on the path to financial success. For the time being, you may not be able to get any more loans, so it won’t be easy to reach the top again. 

Consider all these points before you make up your mind to declare bankruptcy. I hope it works for you!

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