Bankruptcy is declaring yourself unable to pay all your debts that are outstanding. It involves meeting a judge who will help you in determining a payment schedule. Alternatively one may have a legal bankruptcy to discharge most of their debts. Also, one can file for bankruptcy personally. Similarly, a business may also file for bankruptcy and may be forced to close, or it can still operate while paying little amounts to their debtors. The following are the pros and cons of bankruptcy.
Gets the creditors off your shoulder
Declaring yourself bankrupt stops the creditors from repossessing your property in a bid to recover their money back. This also includes sending you any demand letters or suing you. Neither are they allowed to call you in regards to the debt you have with them.
Discharges you from the obligation of paying debts
Declaring bankruptcy will discharge you from paying the dischargeable debts. However, some other debts may not be discharged, and you will be forced to pay them.
Improved credit rating
Despite the fact that bankruptcy lingers on your credit report for six or seven years, one will eventually develop a good credit rating by starting off again after this period. It only calls for patience as you wait for the period to end.
One may apply for bankruptcy exemptions which will prevent their property from being sold to pay for the debts they are still having. This will help them retain their property in case of anything.
Filing for bankruptcy should be the last resort. Despite gaining from the fact that your duty of paying debts is discharged one may also suffer some consequences.
Seizing of property
If one can’t list all their property under bankruptcy exemptions, it may be seized. The bankruptcy court will seize your property and sell it to cater for your debts.
Bad credit report
Filing for bankruptcy will eventually spoil your credit report. Even worse is the fact that it will linger on your credit report for six or seven years. This may limit you from taking loans from financial institutions.
Difficulty in finding a job or a house
Some employers may not hire you given your history of bankruptcy. This may make your chances of getting a job very slim. Even landlords may find it hard to give you a house because of bankruptcy. More to that, one may also be excluded from the list of company directors of a particular company.
Not all debts are discharged
One may not be exempted from paying debts such as student loans, child support, and even fines. So it does not discharge you from all your debts per say.