Articles

Was added 24-03-2011 02:26

This is a guest post by Kevin Craig who is a financial writer with various finance related Communities. He also writes for Oak View Law Group. He has been providing advice on credit card debt consolidation since 2007.

A lot of people are resorting to bankruptcy in the post-economic depression period. Actually, consumer debt is at a record high which is forcing the debtors to file bankruptcy. Financial experts believe that bankruptcy rates will not dwindle in the near future because of widespread unemployment and stagnant income growth in most parts of the globe.

Are you knee deep in debt and contemplating bankruptcy? In that case, it is important for you to know some important facts about this debt relief solution. Read on to know more.

What are the advantages of filing bankruptcy?

1. Bankruptcy is the cheapest debt reduction process. Also, it can make you debt free quite fast.
2. Bankruptcy gives you a chance to make a fresh start. It will clear all your debts and you cannot be sued by the creditors after the bankruptcy process is over. Therefore, you can start a new and responsible financial life after bankruptcy.
3. You do not need to negotiate with the creditors. So you can avoid some stressful and tough situations.
4. If you file bankruptcy, then an automatic stay order will help you to avoid repossessions and foreclosures. Bankruptcy can also help you to avoid creditor harassment.

What are the disadvantages of filing bankruptcy?

1. Bankruptcy will hurt your credit worthiness. This will make it difficult for you to obtain loans in the post-bankruptcy period.
2. You might lose valuable assets like your house or your car if you file bankruptcy.
3. Bankruptcy might harm and restrict your employment opportunities in certain cases.   

Things to remember while filing bankruptcy

1. In Australia, a creditor cannot force you to file bankruptcy unless you owe more than $5000.
2. The Insolvency and Trustee Service Australia will administer your estate in case no registered trustee has provided consent to act.
3. The unsecured creditors will not be able to take legal actions against you once you file bankruptcy. There are certain exceptions though.
4. Some Student loans cannot be discharged from bankruptcy and some other debts.

What are the assets you can keep in bankruptcy?

You can usually keep items of personal use, clothes, furniture, jewelry, household equipment etc. during bankruptcy.  Your car can be saved if its value is below a certain limit.

Alternatives to bankruptcy

Some people make the mistake of filing bankruptcy when it can be avoided. So consider the following options before opting for bankruptcy:

1. Debt management: Negotiating with the creditors for an affordable payment plan.
2. Debt consolidation: Taking a single loan to clear multiple debts.
3. Debt settlement: Negotiating with the creditors to forgive a part of your debt.

Bankruptcy is an effective debt relief choice for people who are drowning in debt. But you should remember the above points before making a decision.