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  Bankruptcy – Its Advantages And Disadvantages

Let us begin by defining Bankruptcy in simple terms: Bankruptcy means to make a fresh financial start when one is in heavy debts. This situation can happen to any individual or organization that faces severe monetary problems resulting from loss of employment, lay off or business failure. You may be surprised to know that Bankruptcy has its own advantages and disadvantages. Let us list them below in order to have a better understanding of the same.

Advantages Of Bankruptcy

• One's liability is either pardoned or reduced substantially if he is facing a severe financial distress due to loss of a job or prolonged illness.

• Foreclosure or repossession of assets by creditors can be temporarily stalled thereby providing some respite to the person in debt.

• It can also prevent the creditor to attach the debtor's wage or other effects, temporarily.

• Bankruptcy allows a full investigation of the debtors' financial affairs to be carried out, for the creditors. They get into a position to scrutiny the debtors' system of working and management style.

• There is no minimum or maximum debt requirement one can file for, and can discharge any amount of debt. The amount can vary as per the choice of debtors.

• Any unpaid balances are discharged, which are due after the assets have been distributed.

• An individual can keep any wages he/she earns or property he/she acquires after the bankruptcy filing date, except for inheritances.

• Most cases are discharged and get over in about 3 - 6 months.

• A person is protected against collection efforts and wage garnishment.

• A person can keep all exempt and non-exempt property even after being declared bankrupt.

• The court allows more time than the original contract to pay off the debt.

• There is no limit to how many times a person can file for bankruptcy.

• Bankruptcy scars an individual credit record for 10 years or more, making any new transactions or purchases difficult.

• Higher interest rates - or secured credit cards become necessary - for persons who are granted credit despite a bankruptcy record.

• It does not discharge debts such as alimony and child support, most student loans, certain federal, state, and local taxes, debts from criminal activity, legal fines and penalties, luxury purchases made within 60 days of filing, and debts not listed on bankruptcy papers.

• Bankruptcy is a notice of public record that may be seen by potential employers, insurance companies, mortgage businesses, and other lenders.

• Bankruptcy is a social stigma that can cause feelings of guilt and embarrassment.

• An individual or corporate is required to fill in numerous forms and have an extended meeting with the Official Receiver, and, if appointed, a Trustee in Bankruptcy who will thoroughly investigate the affairs.

• Any business owned by the person, gets winded up immediately after bankruptcy.

• A person loses any assets of real value including his/her home, life insurance and possibly pensions after being a bankrupt.

• All bank accounts, credit cards get frozen.

• If the person is leasing or buying anything on hire purchase, the same will be immediately returned to the owner.

• Bankruptcy stops foreclosure only temporarily.

• Not all debts are discharged and can still be collected after the case is closed. A mortgage loan is one such example.

• Anyone who cosigns a loan for the person may be liable for the debt unless they file for similar bankruptcy protection.

• A person who is bankrupt can file for another bankruptcy only after six years.

• One cannot escape by making lower payments during the period of bankruptcy.

• Bankruptcy scars an individual credit record for 10 years or more, making any new transactions or purchases difficult.

• Higher interest rates - or secured credit cards become necessary - for persons who are granted credit despite a bankruptcy record.

• It does not discharge debts such as alimony and child support, most student loans, certain federal, state, and local taxes, debts from criminal activity, legal fines and penalties, luxury purchases made within 60 days of filing; and debts not listed on bankruptcy papers.

• Bankruptcy is a notice of public record that may be seen by potential employers, insurance companies, mortgage businesses, and other lenders.

• Bankruptcy is a social stigma that can cause feelings of guilt and embarrassment.

• Be required to fill in numerous forms and have an extended meeting with the Official Receiver, and, if appointed, a Trustee in Bankruptcy who will thoroughly investigate the affairs.

• Any business owned by the person, gets winded up immediately after bankruptcy.

• A person loses any assets of real value including his/her home, life insurance and possibly pensions after being a bankrupt.

• A person loses any assets, such as inheritances, insurance settlements, and growth of asset value in home, which may be acquired during the term of the bankruptcy.

• Informs the persons' building society, creditors, and proprietor.

• All bank accounts, credit cards get frozen.

• If the person leasing or buying anything on hire purchase, the same will be immediately returned to the owner.

• Bankruptcy stops foreclosure only temporarily.

• Not all debts are discharged and can still be collected after the case is closed. A mortgage loan is one such example.

• Anyone who cosigns a loan for the person may be liable for the debt unless they file for similar bankruptcy protection.

• A person who is bankrupt can only file once every six years.

• One cannot escape by making lower payments during the period of bankruptcy.

Other Useful links

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