Truths about Bankruptcy

 

When an individual or a business partnership is grossly indebted, a bankruptcy is often resorted to. The dictionary defines a bankruptcy as a legal declaration of the inability and impairment of an individual or organization to pay their creditors. A bankruptcy can be filed under several categories; Chapter 7 is the most common. Chapter 11, 12 and 13 involves an individual's income as payment for the debts.

 

Filing a bankruptcy can help a debtor recover his financial footing, a bankruptcy court will give the debtor certain leeway to help him deal with the problem. But there are also disadvantages to this, and many still recommend that a bankruptcy be filed only if there is no other alternative. Below are 10 truths you should know about bankruptcy.

 

1. Your bankruptcy will be advertised in the papers or the local press where you live. Notifications will be issued to everyone with whom you are financially connected. Your bank, business associations, building society, creditors and landlords will be immediately informed.

 

2. Any asset that you might acquire during the term of your bankruptcy will be taken from you. Inheritances, insurance payouts, equity payouts, windfalls and/or pension income might be included.

 

3. There are certain bankruptcy terms that require any business of yours to be closed immediately. Your bank accounts and credit cards will also be closed. Anything that is being purchased by lease such as a car will immediately be returned to its owner.

 

4. There is always a stigma associated with any bankruptcy filing. It is possible that you might lose your professional and business status. Although the federal, state, county, or municipal government may not discriminate against you, membership to your business associations and societies might also be lost.

 

5. If you are declaring your bankruptcy individually in a partnership, you cannot opt to transfer your new business to your partner's name. This practice is regarded as a criminal activity by The Trustees in Bankruptcy and any assets that might have been earned during the bankruptcy will be forfeited.

 

6. If you are an employee, the law prohibits your employer from being prejudiced against you and cannot compromise your employment or fire you because of your bankruptcy.

 

7. Although there is nothing in the bankruptcy laws that will forbid you to hold an account, be prepared to tell the banks that you are bankrupt. Expect that they will impose stringent conditions and limitations on you.

 

8. A bankruptcy will leave a huge negative mark on your credit report permanently. This could make it harder for you to acquire new property, to obtain a credit card with a good credit limit or home mortgage loan and insurance.