Defining Bankruptcy
Considered to be a hot topic by some and a grim reality by
others, bankruptcy is a serious issue that many people around
the world find themselves having to deal with. A large number of
people live in fear of bankruptcy, and even more live with a
number of misunderstandings and half-truths that prevent them
from knowing exactly what bankruptcy is and how it works. Before
making decisions about whether or not to file for a personal or
business bankruptcy, it's important to take some time and
research both what bankruptcy is and what it isn't... and to see
what alternatives to bankruptcy might exist.
The information provided here isn't meant to answer all of the
questions that you might have concerning bankruptcy, but it will
hopefully help you to find some of the answers that you need and
get you that much closer to making a very important financial
decision.
What Bankruptcy Is
As the name might imply, bankruptcy is the process of declaring
yourself or your business legally bankrupt... in other words,
you're in debt to the point that there isn't really any hope of
recovery. Bankruptcy is a legal process that can take some time,
since the court will have to appoint an individual to sort
through your debts, recommend some debts for discharge (meaning
that they don't have to be repaid), and help set up a plan to
have other debts repaid by a direct withholding from your
paycheque.
A variety of different types of bankruptcy exist depending upon
where in the world you live, though most have pretty much the
same purpose. It can take several years before a bankruptcy is
discharged, during which time new credit lines are nearly
impossible to get if they are legally allowed at all.
What Bankruptcy Isn't Unfortunately, many people rush into
bankruptcy thinking that it will solve problems that it isn't
designed to. Bankruptcy isn't a "quick fix" to any financial
problems, and it won't leave you with a clean credit history
after it's discharged, either... it actually does the opposite,
since most creditors don't want to do business with someone who
has recently discharged a bankruptcy.
Additionally, certain types of debts such as alimony payments,
child support payments, and back taxes that are owed aren't
discharged by a bankruptcy; they will still be due even after
the bankruptcy itself has been discharged.
Alternatives to Bankruptcy
Before deciding to file for bankruptcy, you should take a little
time to investigate other alternatives. If you think that you
have enough self-restraint to do without some luxury items and
manage your own finances, you might consider regulating your
repayments yourself and trying to negotiate with your creditors.
If you are unable to handle this, you might want to consider
getting an attorney, an accountant, or someone that you trust to
take over your finances temporarily to assist you with this. You
might also want to look into consumer credit counseling
services, which perform these same functions as a business
service.
Where to Find More Information
Since it's impossible to cover every aspect of the topic of
bankruptcy and bankruptcy alternatives in the scope of this
article, it's recommended that you consult a local attorney to
find out what the bankruptcy laws in your area are and how they
might affect you and your filing. You should also look into
local bankruptcy relief programs in order to see what other
alternatives might be available to help you avoid filing
bankruptcy if possible.
You may freely reprint this article provided the following
author's biography (including the live URL link) remains intact: