For those burdened by unmanageable debt, declaring bankruptcy is sometimes the best option and there can be advantages to bankruptcy.
Here’s a look at 5 reasons that bankruptcy, far from being the end of the world, may actually be to your advantage.
Advantages To Filing Bankruptcy – Protection from Creditors
Prior to declaring bankruptcy, you are totally at the mercy of your creditors, and they can take whatever steps they wish against you. Under bankruptcy, the steps they can take against you are severely limited. They are no longer permitted to pile on interest charges, late payment fees, or other means by which creditors inflate a dragging debt; the debt stays at the amount fixed as of the declaration of bankruptcy until you are discharged, at which point it disappears.
Furthermore amounts already outstanding can be written off. Under bankruptcy, you are required to repay only the part of the debt that you can reasonably be expected to be able to repay, regardless of the raw amount of the debt. Repayment of what you are reasonably able to repay is considered as full satisfaction of the entire debt. After that, your creditors can no longer touch you.
You Don’t Need Your Creditors’ Agreement
Unlike with a formal consumer proposal to creditors, the creditors do not need to agree to your declaration of bankruptcy. There can be a hearing at which they oppose it, but it is an impartial third-party decision-maker, usually a judge, who fairly and equitably decides whether your bankruptcy is to be permitted. All you need to do is demonstrate that your debts are beyond your reasonable, foreseeable ability to repay, and the judge will very likely permit you to declare bankruptcy. Your creditors cannot stop that as the could with an Individual Voluntary Agreement.
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Bankruptcy is Relatively Short-Term
Most people remain under bankruptcy protection for a period of about one year, although it can be longer. Beyond that point, they are discharged and get to start fresh without any remaining liability to creditors. If you can meet the conditions imposed by the judge (which are almost always reasonable) then you can be free of your creditors within a relatively short time. On other hand, an IVA or debt management programme could last the best part of a decade.
Debts Written Off – Advantages to Declaring Bankruptcy
As already mentioned, when you are discharged from bankruptcy, your debts are written off and you no longer owe them. Whatever terms you met in order to satisfy the conditions of discharge are deemed to be sufficient to discharge the debt as well, and the debt disappears. You do not face annoying collection calls for the rest of your life as you might if you had not declared bankruptcy. The creditors and their agents and representatives are legally obliged to leave you alone.
Some Assets are Protected
There are certain assets that cannot be seized in order to satisfy the terms of a bankruptcy so declaring bankruptcy can be an advantage. For example, your primary residence, providing that it is not excessively ostentatious, is usually protected, and you get to keep it provided that a mortgage on that property is not included within the terms of the bankruptcy. Any possessions owned by other people, such as furniture owned by your spouse, is also protected. The things you need in order to discharge your obligations under bankruptcy successfully, such as a vehicle required so that you can keep your job, are also protected. The assets of your loved ones and friends are not implicated in the bankruptcy in any way at all.