Deciding whether to declare personal bankruptcy is a difficult decision with a lot of things to take into account. Here are just three pros and three cons to help you decide whether the dreaded financial procedure is right for you.
The first thing that goes against a personal bankruptcy and that people fear the most, losing assets. In nearly all bankruptcies, individual’s assets are sold off to repay the debts they’ve built up. This means that houses, cars and other secured items of any significant value will be lost. In many cases this is a heartbreaking ordeal, especially for those with families to support.
Bankruptcy is also incredibly embarrassing. You have all of your financial affairs thrust into the spotlight and everything is scrutinised to make sure your case is fully understood. Any financial irregularities can also be exposed and punished if deemed illegal. Obviously though, this doesn’t apply to a great deal of people who have been honest and just made some financial mistakes.
Another major drawback of personal bankruptcy is that it hurts you in the long run as well as the immediate. Once all of your assets are gone and your debts settled, you’re still left with the black cloud of bankruptcy hanging over you. Getting bank accounts, credit and financial products is nearly impossible and when you do get them, you have to pay a higher rate of interest because you’re considered a risk. This can count against you for the rest of your life if you’re unable to rebuild your credit rating.
Fortunately, there are some benefits of personal bankruptcy that often get overlooked. For starters, if you’ve been living with insurmountable debt for a significant period of time you’ll have been dealing with unbearable stress and anxiety. A bankruptcy can immediately lift this burden away. All of your financial affairs are out in the open and you no longer have to deal with multiple creditors all trying to recoup money you owe. This can have an incredibly positive effect on your outlook for the future.
Secondly, you can now be discharged from your bankrupt status quicker than ever, meaning you can begin to rebuild your life and your finances. It won’t be easy but you’ve got a clean slate to start off with. Getting credit will be difficult but if you’ve experienced bankruptcy you probably won’t be interested in spending beyond your means anyway.
Finally, you can arrange a personal bankruptcy yourself unlike an IVA. This means that you know that nobody is benefiting from your financial misfortune. This is probably little consolation if you lose your home and other assets but without the middle man, the procedure can move much quicker and you can start afresh sooner than you probably would have though possible.