What is Bankruptcy for Beginners

Let’s discuss what it means to file for bankruptcy when you cannot pay back debt. What is bankruptcy and how does bankruptcy work?

0:00 - Intro to bankruptcy
1:04 - Bankruptcy info
5:25 - What is Chapter 7 Bankruptcy
7:45 - What is Chapter 13 Bankruptcy
9:29 - What is Chapter 11 Bankruptcy
10:22 - Bankruptcy Finalization Details
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Just a reminder, I am not your personal financial advisor. Please seek professional help on bankruptcies if this is something you need to consider.

Whether you are just trying to understand what bankruptcy actually is, or you are actually thinking that you might need to consider filing for bankruptcy, this video should give you a simplified explanation of the bankruptcy process if you can’t pay your debts.

What happens when you can’t pay your debts? Well that will depend on each person’s unique situation. If you are not able to find a sustainable way to pay back the money you owe to creditor and lenders, then you might need to consider bankruptcy. For people that are underwater with payments, they can get overwhelmed with debt collectors calling them and sending notices of past due balances.

Bankruptcy is what you would need to file if you cannot pay back debt to creditors or lenders (aka the people that you owe money to).

There are a few different types of bankruptcy depending on what type of situation or entity you are (like a business or an individual). Most of the information we’ll share in this video is the same no matter which one applies. So let’s jump in to what is bankruptcy and what does filing for bankruptcy mean.

You might end up needing to declare bankruptcy because you made some not so great choice with your finances and ended up accruing way more debt than you could manage to pay back. Common reasons for needing to file for bankruptcy are unexpected medical or home repair bills, business hit hard times, revenue decreased, you couldn’t meet your expenses. Or maybe you unfortunately lost your job. Or student loan debt might have you under water (but unfortunately student loan debt cannot be wiped out through a bankruptcy filing).

Small business owners have been especially hard hit with the pandemic and the different regulations that were put in place. Don’t forget to keep supporting small businesses in your community. They are super important to our economy and need as much support as possible in this time.

What actually happens when you get to the point where you need to declare or file for bankruptcy? Well you should probably get in touch with a lawyer of some kind. You might be able to navigate the process on your own, but it can get a bit complicated. After that you would file some documents stating that you are no longer able to fulfill your debt obligations.

As an individual, you would be required to go through credit advising or credit counseling. This is basically where you sit down with someone approved by the government to discuss your credit, your debt, spending habits, and other potential topics that could help you avoid bankruptcy in the future. After completing this you would get a certificate of completion with the court to prove you actually did it.

If you are an individual and file for Chapter 7 bankruptcy, this would stay on your credit report for 10 years. During a Chapter 7 bankruptcy, they might sell your house, sell your car, your possessions, and the things you do not need to survive in order to pay back your debt. With Chapter 7, because they are liquidating your assets to pay back debt, you actually might end up not having to pay back all the money you owe…but you do lose your assets still.

If you are not eligible for Chapter 7, then another individual bankruptcy option would be Chapter 13 which stays on your credit report for 7 years. In this option you would essentially head to the negotiating table. Someone else (a bank or lender) would buy off your debt from your creditors (likely at a discount), and then that new creditor would negotiate with you to figure out a plan to pay them back. In this situation you would likely be able to retain your assets (home, car, etc.), but it can be a bit more costly for you since you have about 5 years in most cases to pay back the debt…and you have to pay it all back. But just remember that every situation is a bit different.

Chapter 11 is for businesses and this is a bit of a mix between Chapter 13 and Chapter 7 bankruptcy for an individual. A businesses assets are seized to repay the debt they owe and they would negotiate with the lenders to find a suitable repayment plan for the debts they owe.

Thanks for watching!

Видео What is Bankruptcy for Beginners канала QuinnTalksMoney