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Bankruptcy – The Effects Of Bad Credit
By: Joseph Kenny
There was a time when bankruptcy was probably the biggest stigma that could be
attached to anyone in business. Thankfully those days are long gone. Today,
bankruptcies are fast, efficient and frequent court procedures designed not as a
punishment for the creditor, but as a means of drawing a line under un-payable
debts and allowing everyone to move on. While most people would not exactly like
to be made bankrupt, in most cases where it becomes necessary, it is seen as a
welcome release rather than a humiliating penalty.
When You Become Bankrupt
Bankruptcy is what happens when you simply cannot repay your debts. How it comes
about is one of your debtors, someone who you owe more than £1,500 to, will ask
the court to make you bankrupt. A trustee will be appointed to carry out the
task and then all your creditors will inform him of how much you owe them. He
will gather up all of your assets, and use them to pay off the debts. Creditors
will be paid proportionately, which means that if your assets are not enough to
pay off the debts in full, they will each get the same proportion of their debt
repaid.
What Are Bankruptcy’s Disadvantages?
The disadvantages of this are obvious. By gathering up all your assets, the
trustee will essentially leave you with nothing. Your home, your car, your
savings, everything that he considers a worthwhile asset will be gathered up and
sold. If you have a family, it can be quite traumatic, as they have to leave
their home. If you rent your home then this will not affect you, as there is
nothing there for the trustee to take. Your personal effects such as clothes and
most furniture, will not be taken by the trustee, as they are considered too
personal and insignificant to take.
And The Advantages?
The advantage of going bankrupt however is that it gives you a clean slate.
Regardless of how much you owe, and how much you can afford to pay back, at the
end of the process, you will emerge with a completely clean slate and will not
owe anybody anything. Even if someone forgot to make a claim to the trustee, you
will no longer owe them anything.
The Future After Bankruptcy
After your bankruptcy has been finalised and you have moved on you will be able
to start rebuilding your financial, and probably personal, life again. Bad
credit ratings will ensue, but rebuilding your credit is possible. Just like a
child, baby steps are all that is required. Step by step, more credit options
will become available and after several years your credit rating will become
‘average’ if you keep focused and don’t fall into any quick fix traps.
While the process of bankruptcy may take a while, during which you will not be
able to control your finances and may have to give part of your income to the
trustee, it is generally seen as worth it, and you will emerge ready to make a
new start.
You may freely reprint this article as long as the author bio and live links are
left intact.
About the Author:
Joseph Kenny is the webmaster of the loan comparison site Personal Loan Store, visit the site today for more loan information, articles and links to UK loans. |
