If the bankruptcy is completed properly and successfully, then the benefits are excellent and could not have been achieved in any other way. But like any other financial risk, bankruptcy is not without danger and once the decision is made, it can not be reversed.
It is important to know all the risks associated with bankruptcy and decide if this is the right choice in your situation before proceeding, especially if it is the first time. These are some risks that can be avoided.
1. The timing
When you declare bankruptcy, the laws that apply to debtors and creditors change. It is therefore important that you understand when is the right time to declare bankruptcy. Sometimes the declaration of bankruptcy is urgent and must be made as soon as possible. The best option is to work with a bankruptcy advisor to avoid the risks associated with the business and to choose the right time to do so.
In theory, transferring capital to a person who is not involved in the bankruptcy process is legal, but you still need to be aware of the risks. Some types of transfers may make your bankruptcy declaration a criminal offense or it may simply ruin your chances of not having to pay your debts. Transfers should be thought carefully because they can cause you a lot of problems.
Even if the bankruptcy is not subject to taxation, it can still have an effect on your taxes. The effects will vary depending on the situation, but it is important to make sure that you know exactly what situation you need to do.
4. No turning back
The declaration of bankruptcy is an irreversible gesture. Once bankruptcy is declared the laws applicable to you change. It is important to understand what laws have changed and what their effects are. Beware that debtors, creditors and collection agencies will each deal with you but in different ways.
5. Loss of capital
Once bankruptcy has been declared, all your assets are transferred to a trustee. Once you are exonerated from your debts, the assets will be returned to you. You should be prepared for the loss of some, if not all assets before declaring bankruptcy. There are legal procedures to ensure that certain assets will not be lost. But there are also illegal ways to do it. Make sure you know the difference so you do not break the law, which can result in a criminal prosecution.
Hiding capital and not declaring it all is a federal crime.
7. The choice of the method
It can be difficult to decide which banking process is best for you considering your banking situation. Take a thoughtful decision, because the choice of method during the bankruptcy process can have an impact on the final result.
8. The hidden creditors
The first thing to do with your advisor is the search for hidden creditors. Many people are not aware of the existence of this kind of creditors. If you do not inform your creditors properly, then the amount of money you owe them will not be excused, which means you will owe them money.
9. Court action against creditors
If you pay a large amount of money to your creditor or a family member in the year preceding the bankruptcy declaration, there may be a problem. If the payment of the debt has been late, you will probably have to wait another year before starting the lawsuit. The main reason for this is that the creditor or family member may have transferred the amount you paid to the trustee.
10. Loss of credit
Most people think that the loss of credit to anyone who declares bankruptcy is an irretrievable situation. In fact, the truth is that there is no bad credit when you declare bankruptcy for the impossibility of payment. What is worse, however, is not to declare bankruptcy when necessary. If you declare bankruptcy and the process has been done correctly, it will be quite possible to regain a good credit history. Once you declare bankruptcy, you have a second chance to improve your financial situation and, at the same time, your credit history.
Once you have concluded that bankruptcy is the best option for you, you must make sure you are aware of all the risks involved. Once you understand the risks, bankruptcy may be exactly what you need to start from scratch. Bankruptcy is a difficult decision that does not apply to all situations and, therefore, the decision should not be taken lightly.