A bankruptcy occurs when one is up to their eyeballs in debt and has essentially lost any potential option to repay their debt. Bankruptcies are a federal matter, as set forth by the U.S. Bankruptcy Code.
A legal process that assists consumers and businesses to repay creditors, while paying off all debt. As a general rule, bankruptcies are either classified as ‘reorganizations’ or ‘liquidations.’
Additionally, there are several different types of bankruptcies – referred to as ‘Chapters.’ These include:
- Chapter 7 – For businesses and individuals; Liquidation is a real possibility
- Chapter 11- Normally used by struggling businesses
- Chapter 12 – Relates to family-owned farmland
- Chapter 13 - General purpose: Reorganization; Multi-year repayment program
Even those of us who proactively manage our financial affairs can meet an unexpected moment in time that creates a financial hardship. Stay ahead of the curve and pay attention to early signs of an impending bankruptcy. They are presented here in no particular order:
1. Your monthly expenses begin to exceed your monthly income and you have already missed a payment or two or three. This is the most fundamental signal of trouble brewing in the near future
2. Debt collectors have begun to call, email and write regarding overdue payments; student loan arrears
3. Loss of Employment – A loss of income disrupts one’s income stream and ability to pay
4. All of your credit card balances are nearing their credit limits. This is considered the key indicator (or the tipping point) for bankruptcy. Another sign of concern is when you rely upon lines of credit to meet monthly expenses
5. You have considered (or have) a payday, vehicle-title or high-cost loan
Bankruptcy has its benefits, but remember that the court has the right to inspect your entire financial life and leave no stone unturned. Bankruptcy is your last lifeline. Use it wisely. If you're looking for a reliable and knowledgeable bankruptcy attorney, contact the team at Vivian Law Firm today.