Debt Consolidation Tips – How to Avoid Bankruptcy

Debt Consolidation Tips – How to Avoid Bankruptcy

No one would have thought that bankruptcy is going to become such a major issue when the term originated in the medieval Italy. Well, here we are in the third millennium and bankruptcy is a real problem with very real repercussions. Most people think that going bankrupt is bad for person who is undergoing the process. These people do not know all the frauds that people conduct making use of these laws. Simply, if a person cannot pay money to the people, the bank or a company, court declares him bankrupt. Only a court can make this decision after going through all the evidence presented before them and finding out that there is no way for petitioner to meet his financial obligations.

Again lot of people think that they are home scot free after court declares them bankrupt. However, there are provisions in law for different kind of people or organizations declaring bankruptcy. Initially these laws were to help creditors only and debtor could rot in jail if he could not pay what he owes. In fact in ancient Greek you could take the person who owes along with his entire family as a slave if he could not make the payment on time. Luckily, modern and civilized people have discontinued this practice. Now a day what happens if you declare bankruptcy is that they are going to liquidate all your assets and then use that amount to pay off your creditors. If the amount recovered is not sufficient to pay off all people, then court writes off rest of the loan as a loss for the lending company.

Of course things are not always an s simple as that. Court can order to restructure and continue the business and design a new schedule of payment. Of course the lender prefers this solution over the outright Bankruptcy, as it allows for the recovery of his amount rather than losing all of his investment. Of course, it is a desperation move, which one should try to avoid as much as possible, you see it is going to ruin your credit rating. Once you declare bankruptcy there is no going back. No one is going to lend you money or even rent you a home or any other property.

Another factor you have to keep in mind is that all states do not offer protection to your retirement fund in case you file for bankruptcy. You can end up losing the money that you are counting to see you through the hard times ahead. You also have to notify your employee that you have filed for bankruptcy and federal court has ruled you as a bankrupt. Therefore, you should only make this decision after careful consideration.

 

Mikesmith John is well known debt settlement advisors in UK. He provides useful advice through his article on Debt Management Plan and Debt Consolidation Loans.

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