Bankruptcy is a topic that everyone knows about, but few people understand fully. It can be a complex process that people think is a bad option, but it is really an option of last resort to help you get back out of debt and start over when your situation is too out of control. It’s easy for things to happen, and you end up in a lot of debt, especially if you go into business. Before you write off bankruptcy as an option that you’ll never consider, learn these basic facts about bankruptcy and how it can help you.
What is Bankruptcy?
In simple terms, bankruptcy is a way of clearing your debts so that you can start your financial life over with a mostly clean slate.
For example, you go into business and the market collapses, leaving your business with $1 million in debt that you are responsible for. Without your business, it is very unlikely that you can pay that debt off. Filing bankruptcy can help you discharge that $1 million in debt so that you can move on with your life and not struggle to make payments for decades to come. Whether it is through business or personal debts, you can file bankruptcy to help with a debt load that you cannot handle.
Benefits to Bankruptcy
The biggest benefit to bankruptcy is that you can get out from under debts that you can never hope to pay back on your own. Bankruptcy only lasts, at most, five years. Then, you can move on with your life without most of those debts.
This process is designed to help people avoid spending the rest of their lives in debt and let them contribute to society by continuing to be productive. It also reduces some risks of starting a business or taking personal chances that can benefit the economy.
Downsides to Bankruptcy
There are many stigmas about bankruptcy, but there are only two large drawbacks. The first is that you may have to pay back as much of the debt as possible, which means you may have to give your assets to a trustee to sell and use the profit for debt payments. This isn’t usually what happens, though, as there are exemptions for most of your personal possessions.
The other potential drawback to filing bankruptcy is that your credit rating will drop substantially, making it unlikely that you will be able to borrow money again for some time. You will have to live debt-free, which may put limits on your lifestyle that did not exist before. However, bankruptcy will get you out of debt.
File Bankruptcy with Confidence
It is not unexpected that you may be nervous about filing for bankruptcy. It is a process with numerous stigmas around it. Remember that it’s an important part of getting your financial life in order and can make your situation much better if done correctly. Seek the help of bankruptcy attorneys to navigate the bankruptcy process and file bankruptcy with confidence. Contact Kain + Henehan by calling (612) 438-8006 or filling out the online form to discuss your case with a bankruptcy attorney.
