Filing for bankruptcy means legally declaring that you are unable to repay your debts. It is a formal process where you ask a court to help you get relief from debts you cannot pay. This often involves either liquidating (selling) some of your assets to pay creditors or restructuring your debts into a manageable repayment plan. Once bankruptcy is filed, an automatic stay goes into effect, stopping most creditors from pursuing collections or legal actions against you temporarily. After the process, qualifying debts can be discharged, meaning you are no longer legally responsible for paying them, though bankruptcy will remain on your credit report for several years and can have lasting financial consequences.
What it involves
- Filing a petition with a bankruptcy court.
- A court-appointed trustee oversees your assets and debts.
- Non-exempt assets may be sold to pay creditors.
- A meeting of creditors reviews your financial situation.
- Debts are either discharged or reorganized depending on the type of bankruptcy filed.
Key points
- Bankruptcy offers a fresh financial start but damages credit.
- It provides legal protection from creditors' collection efforts.
- It typically lasts a certain period (e.g., about a year to a few years depending on the jurisdiction).
- You may lose control of your assets and income during the process.
- It is often recommended to seek legal advice due to the complexity of bankruptcy law.
