For small businesses that are struggling to survive in the pandemic, bankruptcy may end up beckoning. While the overall filing of bankruptcy was down in 2020, the percentage will drastically increase in 2021.
Experts believe that this is just the start of the downfall of small businesses. It won’t be too long for the floodgates to break and small businesses seeking relief.
What Is Bankruptcy?
Bankruptcy is a court proceeding to examine the assets and liabilities of the businesses whose debts have crossed a threshold where they think they cannot possibly pay them all.
The court goes through the assets and evaluates the current situation of the business. If the court believes that the business can no longer pay its debt, it can dismiss the loan.
The bankruptcy law aims to provide businesses and individuals an opportunity to start over when their finances have collapsed. To know more about Bankruptcy law, contact the dubai law firm.
How To Navigate Bankruptcy During Pandemic?
Pandemic has been the reason behind people losing their jobs and businesses going out of business. If the same thing is true for you, you may consider filing bankruptcy. Filing bankruptcy is the process of the government knowing about your financial collapse, and you are no longer in the situation to pay your bills, mortgages, and loans.
If you are considering filing bankruptcy, the following information will help you out.
1. Avoid Letting The Cash Pileup
It is important to have an emergency cash fund. But if you are keeping that money in the bank account, it might be seized by your creditors. Hence, try other options to protect your money. For instance, why not keep your emergency funds in the form of an IRA, which can be withdrawn without any taxations.
2. Restrict The Urge Of Using Your Retirement Money
While no one likes being shackled with debt, instead of using your assets to pay up debts, try taking advantage of 401(K). While the withdrawals are taxable, people who can pay back the amount in three years can later amend their tax returns.
3. Do Not Sell Your Possessions
Selling your possession to pay your debt is not an option. In fact, there are provisions in the bankruptcy law that discharge some of the debts without being forced to sell valuable possessions.
The best solution is to file for bankruptcy and wait for the court orders. However, if the court orders you to sell some of your possession to repay your debt, you may decide to do it then.
4. Do Not Take A Loan To pay Up Loans
Most people are short-sighted. They are comfortable with taking new loans to pay old loans. However, they forget that by doing so, they are putting themselves in a never-ending loop.
You must never take out loans when you know you cannot pay them up. Instead, you must talk to the lender and try to find a solution together. Some lenders even allow you to skip one or two payments to reduce the financial pressure.
5. Hire A Bankruptcy Lawyer
Many individuals try to solve the bankruptcy issue by themselves because they worry about the funds needed to pay the lawyer. However, you must understand that Bankruptcy law is full of complications. One simple mistake and your application for bankruptcy might be denied.
Hire an experienced bankruptcy lawyer to solve the debt issues. They are knowledgeable and can guide you through the effective bankruptcy filing process.
Conclusion
Bankruptcy doesn’t always erase all the financial responsibilities. It is just a way to define your business as out of funds and cannot operate. Bankruptcy doesn’t discharge the following type of debt.
- Federal student loans.
- Debts that arise after bankruptcy has been filed.
- Debts incurred within six months before filing bankruptcy.
- Loans were obtained fraudulently.
Most people consider bankruptcy only after pursuing debt management, debt settlement, and debt consolidation. If these options aren’t possible, try looking for low-cost bankruptcy options.
