Bankruptcy seems rather an unusual listing in the catalogue of debt solutions. In truth many are of the belief that bankruptcy should not even be considered, unless all options have been meticulously well thought-out. Well, this may well be true, because bankruptcy is a double edged sword with its own share of harmful features to match, however there are situations when no other options could meet your requirements as a possible debt solution.
The Legal Interpretation of Bankruptcy
“Bankruptcy, as per UK legal regulations, relates to a situation, wherein the debtor is declared wholly unable to repay the amount owed and thus freed from any associated obligations to clear the outstanding amount. Post declaration of bankruptcy, the lender’s right to demand un-cleared funds ceases to exist. It is a completely law governed procedure; bankruptcy provides a debt solution by way of making a borrower’s financial crisis or rather economic failure public. Public declaration of the bankruptcy status is recorded on the bankrupt individual’s credit file for a period for years (see enterprise act for updates) and thereafter also, is removed only post an official request of the same. The stated records imply a bad credit rating in times to come and thus the obvious worsened credit terms. But despite the stated, with bankruptcy, the seemingly impossible debt solutions are figured out”.
Types of Bankruptcy
There is not just one standard credit policy for all borrowers and there cannot be one standard bankruptcy status for all insolvents. Bankruptcy law in the UK classifies bankrupt applicants into different categories, depending on their individual situation, past record, expected sources of income for example. These categories could be one where the debtor gives property over a particular limit, as decided during the legal procedure, to be sold or there could be cases where the court dictates that a stipulated sum is to be paid monthly as an attachment of earnings i.e. directly from a salary package.
Bankruptcy Has a Cost
While researching for solutions to debt by bankruptcy, you may be required to spend extra funds. There are administrative costs such as court fees, deposit fees, etc., which need to be submitted in order to begin the procedure for the filling of bankruptcy.
Few things to be considered:
- Bankruptcy is undoubtedly not an easy debt solution. This could be viable when no other options such as debt consolidation or management, second mortgage loans or short term credit plans, seem to work.
The undesired stress in such other options might drive a conclusion to this direction.
- Before deciding and moving on with the legalities involved, just remember that even with bankruptcy, the borrower may not be allowed to retain the collateral owed to a creditor. Moreover, other debt issues such as payments towards child support, etc., might continue.
If no other debt solution is helping deal with large proportions of debt, bankruptcy might be give respite from continual financial crisis related stress and harassment.
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