The word Bankruptcy is a nightmare for every individual especially those businesses which have a significant goodwill. Bankruptcy is a legal term or statuses that have given to the people who are unable to pay their debts. It is a term given by the court after getting an application from the individual. Bankruptcy can refer as the final way for those who have loads of debts and bills to pay. The state of bankruptcy is the operational way to clear out the debt obligation.
Even though it is a legal way, it indeed has some consequences. Bankruptcy can affect your credit ratings and any plan to use the money. It can stop getting wages, and you might have to face the legal actions of the creditors as well. Filing for bankruptcy is a costly and complicated procedure. You will have to check everything before filing for bankruptcy.
The consequences of bankruptcy are big. Once you declare yourself as a bankrupt, your credit ratings will go down. The drop in credit rating depends on which chapter your bankruptcy comes under. For example, if your case comes under chapter 7 of the bankruptcy act, then your credit report will have a bankruptcy in it for seven years, and if you case fall under Chapter 13, the bankruptcy will remain for ten long years.
During this time you will not get any loans or credits from anyone. You will not be able even to apply for any jobs as the case can create issues for you. Being bankrupt means your credit report has got damages. So if you pay your bills correctly even after declaring bankruptcy, it will not create more damages to the report.
If you consider bankruptcy as a way to escape from the bills and loans, there are some other things where the bankruptcy cannot help you such as child support, fraudulent loans, etc. If you have taken the loan as a group of people, the other people will be still responsible for the loan, even though you are bankrupt.
There are different types of bankruptcy. The most common types are chapter seven and chapter thirteen. Non- business bankruptcy cases fall under chapter seven. In this, you can keep your critical assets however the exemption can vary. You can receive your pensions even if you are bankrupt under Chapter 7. Chapter 13 is only possible for those whose debts should not exceed a certain limit. A 3-5 year plan is available wherein you can pay back your creditors. If you do so, the remaining cases will be taken off from the bankruptcy case.
A lot of people consider bankruptcy after they pursue debt settlement. This settlement means combining all your debts together so that you can make timely and regular payments to clear the debt. This attempt can help you get back on track. The real aim of this settlement is to speak with your creditors and get a lower payment as your repayment amount. If the creditors agree to this settlement, you can slowly repay all your debts.