When does one file for bankruptcy?
Once thought of as something that happened only to businesses, bankruptcy is an option that has become increasingly popular for individuals. More and more people are using bankruptcy as a way of eliminating unmanageable debt, which is why the number of individuals filing for bankruptcy has grown worldwide considerably in the last few years.
The main purpose of bankruptcy is to give an honest debtor a fresh start in life by relieving them of their debts, subject to certain terms and conditions. If a debtor becomes insolvent, they might consider filing for bankruptcy as a debt solution in order:
◾To stay legal proceedings and end the harassment by the creditor, their attorneys and debt collectors.
◾ To stop paying the creditor for years to come, as these payments are first utilised for payment of the creditors’ attorneys’ legal fees, collection commission and interest, before finally effecting a set-off against the capital debt.
◾ To solve a debt problem where creditors are uncompromising or unwilling to accept alternative options, in order to restructure the debt repayment in affordable instalments.
◾ To have an impartial person liquidate assets and distribute the proceeds amongst creditors in an orderly fashion, without undue preference occurring to anyone.
◾ To avoid paying unjustifiable amounts for bad business decisions, mistakes or unforeseeable economic changes over which the debtor had no control, ultimately resulting in a state of insolvency.
◾ To enable an insolvent person to make a clean break and to afford them the opportunity to start rebuilding their financial life anew.
Bankruptcy should only be considered once you’ve obtained enough information on the subject to make an informed decision.