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7 Things You Should Know Before Filing for Bankruptcy
Every one of us knows a company that we’ve liked or enjoyed the services of that have gone bankrupt. Here’s a quick historical list of the 10 biggest American companies that have filed for Chapter 11 bankruptcy in the last two decades:
- American Airlines in 2011 (reformed under new management)
- Chrysler in 2009 (restructured)
- MF Global in 2011 (DOA)
- Conseco in 2002 (restructured)
- Enron in 2001 (DOA)
- CIT Group in 2009 (re-emerged)
- General Motors in 2009 (government bailout saved GM)
- WorldCom in 2002 (regrouped as MCI, later sold to Verizon)
- Washington Mutual in 2008 (JP Morgan bought up the remnants)
- Lehman Brothers in 2008 (Liquidated)
And, the list of well-known big box companies filing for bankruptcy just keeps coming, with the likes of Toys R Us, RadioShack, and Payless Shoesource. It doesn’t matter if you are a business or an individual, if you are in over your head and you think bankruptcy is the only way out, there’s a few things you should consider first.
Top 10 Things to Know Before Filing for Bankruptcy
Filing bankruptcy can be a scary ordeal, but it’s also good to know that you have choices. The following are some of the most important things to consider before filing for bankruptcy:
There’s More Than One Type of Bankruptcy – Individuals typically file Chapter 7 and 13 for bankruptcy. Chapter 7 basically liquidates your assets, until you are able to pay off your debits. Chapter 13 is more of a restructuring process, where a new payment plan is agreed to by debtors. A business is also allowed to file Chapter 7, but it will no longer exist when the process is completed. However, the most often used bankruptcy filing for businesses is Chapter 11, so they can regroup financially, get their debts paid, and continue operations. Individuals, mostly wealthy ones, can also file Chapter 11.
How Does Bankruptcy Affect Your Credit – Well, one of the biggest drawbacks to filing bankruptcy is that it can wipe out a good credit history. It will also appear for approximately 10 years, when lenders try to pull your credit rating. You’ll also have to report a bankruptcy when applying for jobs, filling out medical forms, and other government documents. And, even though you can rebuild your credit, you’ll have to continue reporting the bankruptcy for the rest of your life. A bankruptcy will most certainly have a negative impact on your chances of buying a new car, a house, or paying for your kid’s college education. A lot of times, individuals must pay cash, if they want to make those sort of big ticket item purchases.
Not All Debts Go Away After a Bankruptcy – Not all debts can be discharged as a result of a bankruptcy, including student loans, alimony, real estate liens, back taxes owed, and child support in arears.
Filing Bankruptcy Is A Time Consuming Process – Bankruptcy involves a lot of focused time filling out paperwork and rounding up financial information. You’ll also need to miss work and take part in legal proceedings, so you’ll also lose income that way by filing. Bankruptcy filings are also public records, so anyone who knows how to pull up your records can find out you’ve had a bankruptcy.Bankruptcies Are Not Free – When you go through a bankruptcy, you are subject to following the directives of your attorney and the court. You’ll generally have to pay attorney’s fees up front, because attorney’s fees can’t be discharged like other debts. Filing bankruptcy fees for Chapter 7 cost an average of $1,200 in 2009, according to one study.
Creditors Can Challenge Your Discharge Request – When filing a bankruptcy, you’ll have to file a complete list of debtors and how much is owed to each. Sixty days after a meeting of the creditors in sworn deposition, they will have the chance to file a lawsuit against you to challenge you for the debt still owed to them. Creditors who don’t file lawsuits by the deadline can no longer challenge you for repayment.
Seek Professional Consultation – You should really seek the counsel of a professional legal or financial advisor before deciding to file for bankruptcy. You might find that you can make certain sacrifices, so that you don’t have to go through a life changing ordeal.
Contact a Denver Bankruptcy Attorney at Garcia & Garcia, P.C.
There are some cases, where individuals and companies find it impossible to pay back creditors. If you find yourself or your company in an unfortunate position, where the only logical way out is bankruptcy, then contact a Denver Bankruptcy Attorney at Garcia & Garcia, P.C. to see how our legal team can best advise clients on taking debit issues serious.
For more than 40 years, our lawyers have been helping individuals and businesses deal with a very challenging financial future. We have the experience and skill to help anyone get their lives and business back on the road to recovery.
To schedule a free, no obligation initial consultation to meet and discuss your case, call or email our firm using the form at the bottom of the screen.
1“Seven Things to Know When Filing for Bankruptcy” published in The Simple Dollar, Dec 2016.
Categories: Bankruptcy Planning, CO Bankruptcy Exemptions, Debt, Debt Relief, Financial Tips