Filing for bankruptcy may provide immediate relief in the form of stay on the demands and threats of the creditors and also discharge of the loans. There are, however, some elements of the bankruptcy, which may cause a deep damage to the assets and credibility of the debtor..
Bankruptcy may lead to the loss of the valuable assets of the debtor such as house and car, both of which are basic necessities. .
Once the bankruptcy proceedings are initiated, the debtor and his family lose control over their financial assets which are taken over by the trustee or the official receiver and the presiding magistrate. It is difficult to rebuild these assets once they are liquidated for disbursement to the lenders.
The financial credibility of the debtor is ruined and cannot be easily regained even after years of efforts. The credit rating falls very low and the debtor's credit records bear the evidence of bankruptcy for as long as ten years. A debt repayment plan does not do away with the credit history of the debtor.
According to the Fair Credit Reporting Act, the credit assessing agencies can keep a record of your credit untrustworthiness up to a period of seven years. Besides this your creditors will continue to report to the credit rating agencies the information about your accounts that are maintained through the debt repayment plan. If you delay or miss out any payment even due to genuine difficulties, the same is duly reported.
This makes it very difficult or even impossible for the debtor to get mortgage or any other credit such a card or loan for years to come. Even if he succeeds in getting a loan, it is on very high rates of interest. They are also accompanied with stringent conditions.
Bankruptcy carries an embarrassment and a stigma that take years to erase. The bankruptcy is advertised in the national newspapers and recorded with credit rating agencies. If the borrower who is declared bankrupt is a tenant, his landlord is informed.
The employment prospects are ruined beyond easy redemption. The employers are reluctant to offer jobs to the bankrupt, even though the law prohibits any discrimination against them. This further compounds the situation. A bankrupt, cannot, in certain cases become a director of a business firm.
There is no doubt that the discharge of certain loans and the debt repayment plans can reduce a lot of financial burden. It must, however, be noted that the loans discharged are usually the unsecured ones such as credit card, shopping store loans and so on. The secured loans have to be paid otherwise the house or the car of the debtor may be repossessed. You have to pay your taxes, medical bills, student loans, fines, and penalties imposed due to the violation of law.
These include fines on drunken driving, evasion of assets from nonexempt assets through fraudulent transaction, false statements before the courts and lending institutions to get the loans and so on. The best course to avoid bankruptcy is to budget your income and expenses and seek credit counseling from some reputed non profit social agency.
Bankruptcy may lead to the loss of the valuable assets of the debtor such as house and car, both of which are basic necessities. .
Once the bankruptcy proceedings are initiated, the debtor and his family lose control over their financial assets which are taken over by the trustee or the official receiver and the presiding magistrate. It is difficult to rebuild these assets once they are liquidated for disbursement to the lenders.
The financial credibility of the debtor is ruined and cannot be easily regained even after years of efforts. The credit rating falls very low and the debtor's credit records bear the evidence of bankruptcy for as long as ten years. A debt repayment plan does not do away with the credit history of the debtor.
According to the Fair Credit Reporting Act, the credit assessing agencies can keep a record of your credit untrustworthiness up to a period of seven years. Besides this your creditors will continue to report to the credit rating agencies the information about your accounts that are maintained through the debt repayment plan. If you delay or miss out any payment even due to genuine difficulties, the same is duly reported.
This makes it very difficult or even impossible for the debtor to get mortgage or any other credit such a card or loan for years to come. Even if he succeeds in getting a loan, it is on very high rates of interest. They are also accompanied with stringent conditions.
Bankruptcy carries an embarrassment and a stigma that take years to erase. The bankruptcy is advertised in the national newspapers and recorded with credit rating agencies. If the borrower who is declared bankrupt is a tenant, his landlord is informed.
The employment prospects are ruined beyond easy redemption. The employers are reluctant to offer jobs to the bankrupt, even though the law prohibits any discrimination against them. This further compounds the situation. A bankrupt, cannot, in certain cases become a director of a business firm.
There is no doubt that the discharge of certain loans and the debt repayment plans can reduce a lot of financial burden. It must, however, be noted that the loans discharged are usually the unsecured ones such as credit card, shopping store loans and so on. The secured loans have to be paid otherwise the house or the car of the debtor may be repossessed. You have to pay your taxes, medical bills, student loans, fines, and penalties imposed due to the violation of law.
These include fines on drunken driving, evasion of assets from nonexempt assets through fraudulent transaction, false statements before the courts and lending institutions to get the loans and so on. The best course to avoid bankruptcy is to budget your income and expenses and seek credit counseling from some reputed non profit social agency.
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