It’s not all the time that people are financially stable with a steady job or business to support them and their families. Certain circumstances lead them to drain their personal savings and go into debt such as losing a job, going through divorce or their business going bankrupt.
If you’re one of those facing debt and having difficulty paying your dues despite having a regular job, filing for Chapter 13 bankruptcy can be your best option. This is if you have already exhausted all means to help you settle your debt.
In the U.S., 35 percent of Americans have unpaid bills and debts according to a research done by the Urban Institute. Their unpaid bills include those for credit cards and hospital expenses while their debts are caused by failure to make timely payments for mortgages, auto loans, student loans, gym memberships and cellphone contracts among others.
In the U.K., research showed that an estimated 3.4 million adults face severe debt problems. In terms of bankruptcies, the number reached 19,000 in the second quarter of 2009 alone.
Reasons People Go Bankrupt
People go bankrupt for quite a number of reasons. They spend more than what they earn, they are unable to pay their various bills whether for utilities, credit cards, cellphone or they are behind in paying their loans. When things are out of control when it comes to managing finances, there’s a likelihood that people will go into huge debt. Their last recourse is filing for bankruptcy.
The downside of having suffered from bankruptcy is the inability to avail of personal loans and credit cards moving into the future. In some cases, banks will not allow you to open a standard current account during the 12 months after your bankruptcy particularly for those based in the U.K. Fortunately, the British government introduced the basic bank accounts in 2003 to allow bankrupt people to gain access to simple banking services.
Ways to Recover from Bankruptcy
“Filing for bankruptcy, which is a three- to five-year process, requires people to commit to managing their finances well moving forward,” according to Chapter 13 bankruptcy attorney Simon Resnik. “A repayment plan will be created for you and your task is to pay back your debts in part or in full within three to five years,” he stressed.
But before that, you need to provide comprehensive information about your financial status including your debts, assets, income, expenses and financial history. You have to be honest when doing this as failure to provide the necessary details will cause problems in the future.
Your case can be dismissed or worse, you could face criminal penalties. Make it a point that the documents you provide contain honest, accurate and thorough information.
Once you have started your financial rehabilitation process, keep in mind to follow the best practices consistently for faster recovery.
Live within your means. Focus on your repayment plan and don’t overspend. An ideal way to keep track of your income and expenses is to make a list. This way, you know where your money goes and how much you’re saving. Live simply within the next three to five years and you’ll soon find it easy to manage your budget.
Communicate with your lawyer. Also, don’t forget to keep in touch regularly with your attorney. Documents such as ledgers will be sent to you periodically from the trustee’s office as well as copies of any proofs of claims filed by your creditors. Creditors normally file claims if they want to get paid and if you have questions about their claims, you should immediately contact your lawyer to file an objection.