Finance & Loans

Declaring bankruptcy to endure debts

Declaring bankruptcy to get free of debt is not as simple as it sounds. There is a proper time to do it to avoid further financial and legal ramifications from occurring. Despite the sharp rise of people declaring bankruptcy in the last 12 months, numbering over a million, a indebted person has to meet certain criteria to qualify as truly bankrupt. These would fall under several causes, namely physically disability or sickness, redundancy of financial responsibilities and expenditures, as well as debt heaps which continue to pile up.

An indebted person has to realize that bankruptcy will only allow non-payment of credit by up to 4 months, after which the borrower has to resume payments or face legal penalties. There are also recent amendments to the laws covering bankruptcy which disqualify a person who has filed for bankruptcy within eight months of the current date. Also, all non-exempt assets that a borrower holds must be surrendered to a trustee appointed by the court, who will sell the assets and transfer the proceeds to the creditors owned.

For persons who do not qualify the above requirements of chapter 7, filing bankruptcy under chapter 13 is another option. This requires the person to make monthly payments for a duration of 3 to 5 years, under the court’s protection from creditors making contact with the person to collect payment. Indebted persons must realize that bankruptcy declaration should be a last-resort option. This should only be done only after all alternatives have been taken.