Declaring bankruptcy is typically the last step for a business, made only after all other means of restructuring finances have been proven futile. There may be various options for a corporation under various provisions of the law to file for bankruptcy.
Under Chapter 7 bankruptcy proceedings, debt relief may be received within three to six months from filing for bankruptcy. Bankruptcy proceedings make a lasting impression on one’s credit report for up to 10 years. While this may seem like a long time, non-filing of the procedure can lead to a default in payments, repossession of assets, etc., which may be worse. However, Chapter 7 bankruptcy does lay down certain exemptions where personal property may not be put up for repossession. Furthermore, any salary earned or property bought after filing for bankruptcy does not fall under the purview of Chapter 7 bankruptcy.
Many American consumers face a lot of problems when their credit cards are taken away during bankruptcy proceedings. Nonetheless, the silver lining in such cases exists in the knowledge that it is usually the credit cards that have led to a debt trap for the bankrupted individual.
While most financial institutes may not see one as a suitable candidate for lending after filing for bankruptcy, there are few specialized institutions, which lend to such defaulters. Chapter 7 bankruptcy proceedings can be filed only once every six years as opposed to Chapter 13 proceedings, which may be filed under any contingency. Filing for bankruptcy may be cathartic for many as it helps in giving one a clean slate to rebuild their credit scores.
It must be noted that bad credit scores, including bankruptcy does not relieve one of certain financial obligations. These include spousal support, child support, etc. Student loans are also not exempted after filing for bankruptcy. Filing for bankruptcy is usually the last resort for many. But, one may find it a better option to get professional help to understand which scheme under the bankruptcy law would be ideally suited for one’s situation.
Source: FindLaw.com, “Pros and Cons of Declaring Bankruptcy under Chapter 7,” accessed on Aug. 7, 2014