When a person falls into a debt trap and unable to seek help and any solution to deal with it and falls in more problems created by himself with the reference of banks’ policies or private lender’s affirmations proposed to call this condition as Bankruptcy.
In ancient times, when a person used to fail to repay the loan amount to the lender within the period, the borrower had to make proposals and demanded more time for repayment but if the exceeded time would over, and no other trick could work upon the lender.
The lender tended to ask him for his personal things that might be auctioned or as mortgages and keep with him and often forced him and his family to work for him freely until his loan not repaid or control their lives for a lifetime. It also termed as bonded labour.
Today, unlike previous times, the failed debtor announces himself bankrupt and file for extra financial help on legal terms to refine his debts and recreate his business moves. Then the authorised companies or system work to get him rid off his bankruptcy and save his life.
Through this blog, I shall be highlighting the bankruptcy’s understandings, types, pros and cons, being discharged from it with external financial sources like direct lenders.
Bankruptcy: a connotation
The meaning of bankruptcy or insolvency is committed to the fact that it indicates that the person or a company is getting trapped in the web of debts at the same time; it allows it to start afresh by forgiving the debts that seem difficult to pay off to the creditor.
It allows the creditor to revive his money or to obtain the repayment on behalf of the debtor’s assets or his business.
However, when a person files for bankruptcy on behalf of the creditor, they both might benefit and prove to be profitable to the whole economy.
It allows the debtor’s company one more chance to gain access to financial assistance and the creditor by providing a part of debt repayment.
If the filing for bankruptcy gets succeeds, the debtor is fully relieved of all debentures and the obligations that were imposed on him prior for filing it.
Types of bankruptcy filings:
Bankruptcy filings are for various formulation and conditions of the workers and business holders to keep their position high and maintain their existence in the competitive market. They may vary from person to person and business to business.
Bankruptcy filings depend on the type of bankruptcy, its complexity and various other factors. I have tried to enlist how one can file for bankruptcy and at what conditions:
- It allows a company to recreate plans for profitability, cut their costs and help it to find ways to generate and increase the revenues.
- It allows an individual or a business to be with consistent income that enables them to create repayment chart available all the time.
- It is available for financially distressed localities, municipalities, towns, cities, counties and other regional variations. They do not have to liquidate their assets to repay the mortgages but plan their repayment chart over time.
- It helps the small scale business like fisheries, poultries, cattle rearing and family farms while working out a systematic plan to repay the debts.
Discharge from bankruptcy
When a debtor gets discharged from the bankruptcy and receives discharge letter, he is not obliged to pay the debts. It disables the creditor not to undertake any assemblage from the debtor legally.
But not all debts are managed to gets discharged; instead, it may take some extra time and provisions to be fulfilled by the debtor.
Pros and cons
Pros- when you declare bankruptcy, you are relieved of paying any debt and can save your home, and business. It enables you to function financially, depending on the type of bankruptcy you have filed for.
Cons- Despite the many advantages you have read, there are some disadvantages, though. You might fail to apply for more loans, and you may find difficulty in getting mortgages, purchasing homes and vehicles, buying credit card or even in getting a rented apartment.
A bankrupt person might not get passed in applying for loans due to high debts, and maybe his lender charges him by taking legal actions against him. Nevertheless, certain direct lenders help in bankruptcy with County court judgement or CCJ loans in the UK.
However, by following some harnessing products and working with them comprehensively, one should legalise the company always remain untouched from insolvency. Still, if somehow his company finds difficulty in getting rid of it, then Insolvency’s disadvantages can better be removed by seeking profit from it.
The bankruptcy of the company can be defeated with the right measures one seeks to apply to make his company regret the previous bad records.