Filing Bankruptcy Just Another Step to Solvency

Is bankruptcy for deadbeats and slackers or can it be a step toward solvency? It is up for debate, but filing bankruptcy can viewed as a step toward solvency, and here is why, since bankruptcy laws were designed to help honest individuals and businesses to work their way out of an unfortunate dilemma, bankruptcy can alleviate debt between two parties.

Instead of asking whether or not filing for bankruptcy protection is a viable solution to insolvency, the more important question to ask yourself is how bad things need to get before deciding to petition the courts for bankruptcy. Many bankrupt debtors wait way too long to decide to file.

Fear of personal failure and dread of ruined credit may delay too many bankruptcy filers. Many debtors empty retirement accounts and sell valuable assets to pay off their debts, often too little and too late. Their fears can prevent them from taking advantage of the financial protection offered by bankruptcy, which may allow them to erase most of their consumer debt while preserving assets like retirement accounts and sometimes even a home and car. Instead, many people delay filling until they are truly desperate.

How do you know if you are bankrupt? You are completely financially bankrupt if your current sustainable income plus any cash reserves will not pay all of your living expenses, pay interest on outstanding loans, and reduce some of your principal on those loans while paying on them for five years. Depending on which state you live, the formula should not consider the current value of your assets owned outright, including any retirement accounts. Paying off debts for five years is chosen because five years is the maximum legal number of years a United States Bankruptcy Court allows an individual to work their way out of bankruptcy protection.

The reason your assets owned outright are not considered in determining whether you are bankrupt or not is a practical one. The reason you file for bankruptcy protection is to deal with your creditors and protect what assets you own. Liquidating your assets to pay-off creditors is not only impractical, it can be a very bad idea. Waiting until your resources are entirely depleted defeats an important purpose of bankruptcy protection, which is to help you rebuild finances.

Bankruptcy laws are complicated, undergoing a major overhaul in 2005. Many debtors are confused about their financial options. Do you worry about the possible outcomes of filing bankruptcy? Do you wonder when is the best time to file bankruptcy? Contact a bankruptcy lawyer for more information. 

If you need relief from stress associated with debt, and you live in or around the metropolitan area of Birmingham, Alabama, contact us at .We will help you find a bankruptcy attorney in your area who will answer your bankruptcy questions.

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