What are the disadvantages of Bankruptcy?

February 24, 2012

Bankruptcy

What are the disadvantages of Bankruptcy?

 

What are the disadvantages of Bankruptcy

What are the disadvantages of Bankruptcy

 
Many people think that filing for bankruptcy is the best way to relieve themselves from uncontrollable debts. In actual fact bankruptcy has some hidden disadvantages that are long lasting and will affect a person that files for bankruptcy for the rest of their lives. In order to elaborate on that more, we are going to look at some of the disadvantages that filing for bankruptcy has;

When a debtor files for bankruptcy they lose all their property. Property that is repossessed will include real estate, vehicles as well as monetary investments. When you file for bankruptcy all your property will be liquidated and the money will be used to pay all your unsecured loans. The major disadvantage of this is that you will remain with no valuable property and if ever you are to get back on your feet, you will be starting from zero.

Filing for bankruptcy is not a reversible procedure. Once you declare yourself bankrupt you cannot comeback and claim that you now have the money to pay back all your debts. The biggest disadvantage is that filing for bankruptcy is not reversible so it will always affect your credit score no matter how much money you make in the near future. This therefore means that whenever you want to borrow money creditors will know that you once filed for bankruptcy so you will be considered a risk borrower. This will definitely make it very difficult for you to acquire unsecured loans.

Filing for bankruptcy is the same as throwing in the towel which means giving up. Giving up has psychological and physical effects on a person. This may lead to a person becoming depressed as a result of the stress that is brought about by the feeling of failure. In the case of persons that file for bankruptcy their spouses can start to taunt them such that it may end in marital breakdown and divorce. In worse cases persons that file for bankruptcy may feel defeated such that they turn to substance abuse or even serious crime.

Filing for bankruptcy does not necessarily mean you will be freed from all your debts. This is true for there are certain debts that may not be included in the bankruptcy discharge such that when all your property has been liquidated such loans are not paid out. This will mean at the end of the day you will no longer have all your property but you will still be forced to figure out a way of paying the remaining debt. So at times filing for bankruptcy may even expose you to further debt woes.

Filing for bankruptcy is different from opting for a credit management plan, for a credit management plan helps you to regain control of your finances while bankruptcy only looks at you giving back owed money. So bankruptcy can leave you financially stranded while a credit management plan figures the best way you can pay back while living a near normal life. So it is important that you only file for bankruptcy when it is the last option and there are no other alternative solutions.

What are the disadvantages of Bankruptcy?

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Filing for bankruptcy

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