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How Do I Declare Personal Insolvency?

People file for bankruptcy when they can't pay their debt.
The act of declaring personal bankruptcy begins by meeting the criteria established by a court.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 24 September 2014
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Also known as declaring personal bankruptcy, declaring personal insolvency is an event that takes place when an individual determines that it is no longer possible to honor current debt obligations. In order to resolve the issue and be able to begin again without the debt, the individual seeks the support and protection of the courts to wipe out old debt and have the chance to begin anew. Since working with a bankruptcy court is essential to the process, the act of declaring personal bankruptcy begins by meeting the criteria established by that court in order to receive the desired protection.

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While bankruptcy laws vary from one jurisdiction to another, most require that the individual seeking to declare personal insolvency provide full disclosure regarding his or her financial situation. This includes reporting all assets as well as all debts. Doing so makes it easier for the court to determine if the particular type of bankruptcy protection requested is appropriate for the situation. In addition, providing full disclosure about assets on hand makes it easier to determine which of those assets may be sold in order to partially settle the debt, and which ones are considered essential to the basic well-being of the debtor. For example, a court may determine that the vehicle used by the debtor to get to and from work is not available for sale, since loss of the vehicle would make it harder for the debtor to maintain his or her job, and place the individual in additional financial distress.

Anyone seeking to declare personal insolvency needs the assistance of legal counsel. In some jurisdictions, this is mandatory. Other jurisdictions allow individuals to file the required paperwork and represent themselves in court without the presence of professional legal assistance. The main benefit of competent legal counsel is that bankruptcy attorneys are more likely to be up to date on current laws and be in a position to help clients avoid common mistakes that could lead to a rejection of the bankruptcy petition. While attorneys do charge fees for representing a debtor in a bankruptcy court, those fees are often reasonable and provide benefits that more than justify the expense.

Competent legal counsel can also aid people seeking personal insolvency protection to explore their options closely and determine if some other option would be in the best interests of the individual. This includes considering debt restructuring through the courts, or the elimination of debt altogether. An attorney will make sure the client is aware of the legal consequences associated with each type of bankruptcy protection offered in the jurisdiction, as well as the benefits associated with each option. In addition, the attorney can help the debtor understand the policies and procedures of the court, including what to expect at any hearings or meetings that may be necessary before a decision is rendered. This makes it possible for the debtor to make an informed decision regarding the act of declaring personal insolvency, and be prepared to deal with the outcome of the action.

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