The word “Bankruptcy” has been one of the most hated and notorious word in lending business since the time lending business was started. But a surprising fact is that most of us do no know what a bankruptcy actually means, except a most common perception of the meaning of this word-that is in case of bankruptcy, the debtor is just unable to clear off his debt, that in such case his remaining properties are auctioned off to pay off his debtors.
Infact, Bankruptcy is a legal proceeding whereby an individual or a business can declare an inability to pay back debts. Bankruptcy allows individuals or businesses to either restructure their debt and pays it back within a payment plan, or have most of their debts absolved completely.
Bankruptcy basically means ‘broken+bench’. In past, when a borrower was not able to pay back loans, the debtors’ men used to break the workbench of borrower into two, as a mark of punishment for not paying his loans. Now, it has become a legal jargon and a tool to help an individual or business discharge its burden of debts without been swallowed up by it. It is now a legal term, meaning that an individual cannot, within reason, pay off his various debts and has allowed the court system to take over his finances for the purpose of easing off his debts.
Now bankruptcy laws have been enacted to protect both lenders’ and borrowers’ interest. It was legislated to provide equal and fair measures to satisfy the objectives of all parties. The primary purpose of the bankruptcy lwas were that if a borrower is not able to pay off his debts due to reasons beyond his control, his loans may be waived off. Second, to help a debtor get back his money to the extent the borrower has property available for payment.
Several studies over the years have shown that the primary cause of personal bankruptcy is uncontrollable levels of consumer debt which in most cases is coupled with an unexpected event, such as a major medical expense not covered by insurance, the loss of a job, divorce or death of a spouse. According to economists' surveys, the classic bankruptcy filer is a blue collar, high school graduate who is the head of a household in the lower middle-income class with heavy use of credit.
Different types of bankruptcy exist in different localities and countries, defined by legal codes for certain purposes. The exact types of bankruptcy available differ from one country to the next, in the United Kingdom for example; bankruptcy can only legally be applied to individuals and partnerships, whereas in the United States and Canada, it can be applied to businesses as well.
Despite the serious short term and long-term effects associated with filing bankruptcy, the number of people filing bankruptcy lately has been on the increase. It is estimated that 5.4 people out of 1000 filed for bankruptcy last year and that this rate has been growing at an average of 7%. The alarming ease with which people file for bankruptcy is a growing cause of concern for governments and financial organizations.
Bankruptcy has long been a big question mark in the eyes of the consumer. More often than not, a person's view of bankruptcy is developed by his immediate environment such as his parents or close relatives’ personal views or based on what they see as far as ads etc. regarding bankruptcy. Too often these ads are simply put together by bankruptcy attorneys that want your business. Bankruptcy is big business. With 1,597,462 personal bankruptcy filings being made during the calendar year in 2004 you can see that there is a lot of money to be made by bankruptcy attorneys. While not all bankruptcy attorneys are in it for the money it is apparent by the plethora of advertisements online or on TV that make claims such as you'll be on your way to good credit it no time, or claims that it's easy to file that there are bankruptcy attorneys with their own personal gains at the top of their mind.
Here is a list of myths or untrue statements regarding bankruptcy:
All debts are waived off in case you file for Chapter 7 Bankruptcy Protection.
Your credit rating will be improved if you file for bankruptcy
Bankruptcy is an easy process
While bankruptcy may be unavoidable for some individuals due to hardships that they may be experiencing, bankruptcy is not for everyone. Bankruptcy attorneys should try to find other solutions for you before recommending their own help. Review your options before making your decision, as this may have a long term impact and not provide the quick fix some look for when choosing bankruptcy protection.
If you feel you may enter into mesh of bankruptcy, prior to taking any step, you must think and answer yourself two questions:
Should I go for bankruptcy?
Bankruptcy is fully a personal decision and must not be taken under influence of vested interest. You must evaluate your debt level, your capacity to repay, risk factors, advantages and disadvantages of filling bankruptcy, affect on ypur social status, expense on filling bankruptcy etc.
What is the level of risk for bankruptcy?
In case you are thinking of bankruptcy, the first step is to evaluate the risk factor on the basis of record of late payments, overspending, capability to pay minimum amount monthly, etc-If answer to all these is “yes” then you are at risk for bankruptcy and must get some expert advice.
Steve Clark can tell you how to look better, live better and breathe better by giving you tips to improve your finances. He writes on loans. His ideas can help you rejuvenate your money. To find Personal loan UK, secured loans, unsecured loans visit http://www.ezpersonalloansuk.co.uk
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