Bankruptcy is a legal resource involving a person or business which is unable to comply with the obligation to repay outstanding debts. In general this procedure is designed to grant the debtor a new beginning. The government has legally provided the right to file bankruptcy to those who really need it. However, filing for bankruptcy is not always an easy procedure, and you may not be aware of all the pros and cons.
Chapter 7 – is known as for liquidation , offers the opportunity to start all over. However, not all debts are eliminated, some mortgages as well as liens are not considered.
Chapter 11 – this one is the resource considered by large businesses in order to reorganize their debts to be able to continue operating.
Chapter 13 – through this procedure the debtor is committed to settle all or some of his debts during a period of time considered from three to five years.
In most states, bankruptcy is issued by a court order, It is usually the debtor who initiates the process filing an application. In some of the cases the court issues the order for liquidation procedure whether it be an insolvent business or individual.
Making a decision to file for bankruptcy is a very delicate one. It requires professional advice and great determination. You need to find out whether this alternative is the right one to take as the solution for your financial situation.
You need to be aware of other consequences when taking this option. One thing you need to consider, is that this record will remain on the credit report for ten years.
The laws have been changing, making some of the procedures more complex, it is very important that before making any decisions you thoroughly understand the benefits and disadvantages involved when you decide to go through this procedure.
Bankruptcy is not always the best solution, however, neither is exhausting your hard earned money to pay constant high interest payments, which is somehow worse. This decision could adversely affect your credit and future ability to acquire credit for other important things such as a house or an automobile.
You can be looking for a job, and your potential employer may run a credit check on you, and disregard your application based on your credit record.
A decision like this one, should be the last option to be consider. We should be proactive and exhaust every other possible alternative instead. There are ways of educating ourselves to be able to manage our personal finances in a more efficient way. We should not be slaves of a system designed to draw the last cent of your hard earned money.
With the proper knowledge and self discipline, you will be able to make better financial decisions and gain peace of mind. There are ways to achieve financial goals without ruining our credit. Just be willing to take your step and prepare yourself in order to handle every situation in a wise manner, seek the necessary wisdom, and you will see your situation turn around toward a brighter future.