No More Mortgage Tip – There’s a good side and a bad side to everything, even bankruptcy.

Bankruptcy Sign / Creative Commons License photo credit: Wallula Junction

After all, if there were no benefits to this process, who would want to go through it? Not only could it be a wise move for someone who qualifies for bankruptcy, but it could also be beneficial to certain aspects of the economy. While we all know that not every debt that is incurred is done so in good faith, it is true for the majority of loans and credit incurred.

Most borrowers not only genuinely have every intention of paying back their loans, but they also have no reason to think that in the future they would be incapable of doing so. However, life is never certain and it is a sad but true fact that the unforeseeable can occur.

The loss of a job, a death in the family, natural disasters, huge medical expenses, and other situations beyond a person’s control can be contributing factors resulting in the loss of means to pay on a debt or inability to cover all of the monthly debts. Rather than being thrown in jail for non-payment as in the days of old, we have bankruptcy protection.

There are two types of bankruptcy. However, a borrower can only file for bankruptcy once every six years or more depending on the Chapter they file. This ensures that people do not get in the habit of taking advantage of this system. Chapter 7 bankruptcy involves all or many of the debts incurred by the debtor being either wiped away at once or within a period of anywhere from 3 to 6 months. Chapter 13 is a bankruptcy that allows the borrower to make payments on the debts over a period of 3 to 5 years using their income.

For the most part, the remaining debts that one owes at the time of bankruptcy will be handled by the trustee or dropped away completely. Any non-exempt assets will be sold and put towards the remaining balance, with some home furnishings and sentimental items being able to be spared, and any active credit cards in existence will be deactivated at once.

Obviously the credit score of the bankrupt individual will be severely affected once they have filed for bankruptcy. This unfavorable period will show on ones report for at least 10 years but don’t despair. This is a great opportunity to start over and start fresh. A history from that point on proving regular, consistent payments on any loan still existing can go a long way. After a period of as little as 2-3 years, it is possible to be approved once again for credit. Maybe sooner if you are proactive in establishing new credit that you can ensure the payments will be made on.

The protection provided by bankruptcy can give you a second chance and the opportunity to do a better job the next time around. And rather than laboring to get back on your feet for years you start fresh and could become successful and help others to become successful. You would be surprised at the number of now successful business owners that have gone through bankruptcy.

Related articles

• Going bust (news.bbc.co.uk)
• Bankruptcy numbers on the rise (cbc.ca)