From businessmen to employed individuals, most people will agree that bankruptcy is a scary and harrowing thought to us all. In most jurisdictions, it remains on your credit report for up to ten years, which terrifies people even more.
However, bankruptcy is not the end of the world. While at first, it can bring about negative feelings such as resentment, self-doubt, and despair, it can also be viewed as a great opportunity for companies and individuals to regain control of their finances and re-strategize how to get back on the right path. This is especially advantageous to companies that are sinking faster into a rabbit hole of debt than they can climb out of it. While it can be an overwhelming and stressful period, there’s always a way to navigate the situation for your betterment.
Without further ado, here’s what you should do if you experienced bankruptcy.
Get in Touch with A Bankruptcy Attorney
While bankruptcy is often viewed as a monstrous phenomenon, it may actually come to your rescue during times of financial hardship and despair. Especially when you’re in a quicksand of debt, life can seem mean and unfair. It gets worse when your creditors start buzzing your phone each second claiming what’s theirs. Luckily, filing for bankruptcy can be a way out of your deadening situation. However, it’s important to know and understand that the right steps to file bankruptcy may vary from one individual to the other. This is because, under the law, there are various types of bankruptcy, including chapter 7, chapter 13, chapter 12, and chapter 9. Each of these has its own legal implications and using the wrong bankruptcy procedure could spell the beginning of a new wave of problems. This makes it important to work with an experienced bankruptcy attorney for legal advice and in navigating the entire process.
Avoid Negative Thinking
The first thoughts that come to mind after the filing of bankruptcy are despair, helplessness, feelings of despair and even self-pity. While all these feelings are perfectly normal, you should not, however, let them take over your life. Being unable to service your debt does not mean that it’s all doom for you, neither does it make you a loser. Rather, it’s best to look at it as an opportunity to take a step back and analyze what decisions did not work for you and how you can do better as a company or individual.
According to the Wall Street Journal, a 2010 study indicated that in the United States, personal bankruptcies rose by 9% from the previous years. Major companies in recent years such as Kodak, Delta Airlines, and General Motors have also been forced to file for bankruptcy. This also shows that being bankrupt doesn’t mean that you are a failure, but rather an indicator of how the business environment has become very tough. It’s an opportunity for you to start afresh!
Carry Out Due Diligence
There is a ton of information out there that attempt to guide you or explain to you how and what to do in the event of bankruptcy. While some of this information can be helpful, a lot of it is can be full of contradicting and often misleading advice. It is up to you to carry out thorough and deep research that will help navigate through this difficult period. Having the right amount of knowledge at your disposal will be the difference between you sinking further in debt and improving your credit score, ultimately coming out of bankruptcy unscathed. Simply put, be keen where you get information and advice about navigating bankruptcy.
Avoid Late Payments
When you file for bankruptcy, your credit score immediately nosedives. For you to regain the good credit score that you previously had, you will need to be financially disciplined so you don’t fall deeper into debt. The credit score is based on your payment history, so you must make your payments on time. This is especially in the case where the court grants you a deal to repay your creditors in installments fairer and more manageable to you.
One and the best way to manage your finances better is by using a budget. While not many people like using a budget in their financial management, it becomes a valuable asset when you are in the middle of a bankruptcy process. It is important to set a realistic budget that you’ll be able to adhere to, so you can manage your cash flow better. If you can’t pay all your expenses, it’s better to pay first the most essential ones like rent, food, and home monthly bills. As for the other expenses like alimonies, child support, and student loans, you can talk to your lenders to see if you can negotiate a customized repayment plan that will enable you to not default on any payment.
Setting up an emergency fund is also advisable to keep you prepared in case of any unforeseen events or emergencies such as natural disasters or medical issues.
Devise Viable Strategies
When you declare bankruptcy, it is a great time for you to step back and figure out what decisions and policies that you employed did not work. This will allow you to come up with solid strategies to prevent you from repeating your previous mistakes and help you on your way to regaining financial stability. If you’re a company, the creditors and shareholders can also give their input in developing a strategy to get out of debt, one that has the best chance of success since it’s in both parties’ best interests that the company becomes profitable again.
Yes, bankruptcy can be scary and painstaking. For what it’s worth, it can even ruin your reputation as a business or an individual if it goes public. However, it does happen even to some of the most fortune 500 companies, sometimes due to factors out of the owners’, shareholders’, director’s or managers’ control. Nonetheless, keeping the above points can help you navigate the bankruptcy process like a champ.