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Pros and Cons of Bankruptcy Filing!

Author: leena | Posted: 08.11.2008 | Views: 33

Several factors cause the bankruptcy problem:

•Unemployment problem: It has been estimated that unemployment influences bankruptcy in a major way.

•Credit cards: The easy availability of credit card attracts people. And, in using these credit cards, people are delving into more and more debts. It has been proved that majority of the debts that a debtor owes are credit card debs. The credit card companies charge high interest rate and the debtors are unable to pay back the loan at the right time. They get entangled into more and more debts and finally file a bankruptcy when they are unable to pay back the debt amount.

•Divorce: Over the past few years there has been a considerable rise in the number of successful divorce cases. In majority of the cases, both husband and the wife suffer from financial problems owing to separation. As a result, they opt for bankruptcy.

•Debt to income ratio: Basically, debt to income ratio is the ratio between the total debt amount and net income of an individual. More amount of debt to income ratio you have worse is the condition of your financial status.

There are several disadvantages as well as advantages of Bankruptcy Filing

Advantages of Bankruptcy Filing

Sometimes you have no other option to get out of debt other that filling bankruptcy; but it is also not an end of life. There are some advantages of bankruptcy:

•Become debt free: The process helps you to come out of debt, totally. You file a bankruptcy when you are unable to pay off your debts on your own. If you file Bankruptcy, it will automatically make you debt free.

•Start a fresh life: While you are in huge debt burden, you will suffer from mental pressure, as to how you can come out of it. The creditors keep harassing you. When you are have filled bankruptcy, you can start your life in a new way. It will not only help you to avoid unwanted calls but, it will also allow you to start with a fresh life.

Disadvantages of Bankruptcy Filing

•Adversely affects your credit history: If you file a bankruptcy, it is reflected in your credit report for more than 10 years. As a result, you become less credit worthy. Creditors will not sanction you a loan amount very easily.

•Loss of property: When you are declared a bankrupt, you can loose your valuable assets or cash.

•Social status: Bankruptcy ruins your social reputation. It becomes very difficult to maintain your social reputation if you are bankrupt.

•Financial stress: When you are declared a bankrupt all your credit cards, debit cards, bank accounts are sealed. If you have a house or a car that you have purchased with your cards will be given back to the owner. You will have to start a fresh life with a fresh earning. It is inventible that you suffer from extreme financial problem while you are bankrupt.

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