Bankruptcy gets a bad rap, and while the negative effects can be an issue for years, bankruptcy isn’t the end-all for financial health and making progress in your financial life. There are benefits to it for specific people and businesses. Let’s take a look at bankruptcy, how it works and what your options are for debt settlement programs.   

What Is Bankruptcy And How Does It Work?

Bankruptcy is a legal process that involves the court. A judge and court trustee will examine the assets and liabilities of individuals, partnerships, and businesses whose debts may exceed the ability to pay them down with current assets and income.

The court will examine the financial information provided by the entity seeking bankruptcy and make a decision on whether there are enough assets to cover liabilities. The decision can go several ways, and a judge may dismiss the case altogether if they think the person or business has the funds or assets to cover liabilities during bankruptcy proceedings.

You might think bankruptcy is bad and the beginning of a downward spiral, but bankruptcy laws are important in capitalist economies as they work as a fallback measure for potential financial collapse. No matter the reason for the financial issue, bankruptcy has played a pivotal role in our economy and will continue to help those in need.

Who Can Declare Bankruptcy?

Individuals or businesses may both declare bankruptcy. While most bankruptcies are filed to cover debts in situations where assets aren’t enough, bankruptcy may also be used as a financial planning tool to help square away mortgage payments or taxes.

The vast majority of bankruptcies are declared by individuals, with lower median incomes. But the wealthy also declare bankruptcy if their financial situation makes it necessary.

While bankruptcy is a chance to start over, it also affects credit and can substantially hinder the ability to seek lending and credit in the future. Some experts say the effects can last for 7 to 10 years as bankruptcy remains on your credit report for that length of time.

Consider debt settlement programs to help with your debt needs before considering bankruptcy. 

When To Declare Bankruptcy?

It’s not an easy decision to make and it’s one that should be considered against the negative effects. When in doubt, reach out to debt relief services or a financial services professional you trust to help determine whether it’s worth the negatives.

Keep in mind that bankruptcy is not a forever punishment. It’s designed to provide people and businesses with a second chance. If your financial picture doesn’t look like it’ll change in the next five years, bankruptcy may be the right option to help you break through your liabilities.

The total duration of time it takes to complete the bankruptcy process shouldn’t weigh too heavily on your decision. It’s more important to consider the long-term penalties of bankruptcy as a whole. 

Why Declare Bankruptcy?

Declare bankruptcy if you find yourself having a hard time meeting your financial obligations and need help. It should be taken as a last resort, and it isn’t a good option to consider right away as the penalties may outweigh the immediate benefits of declaring bankruptcy.

If you’ve lost your job, run into difficult financial times, or can’t make your payments because of a change in employment, bankruptcy is a great option to consider and is safe and practical. Keep in mind it’s not a bailout and there are a lot of variables that will contribute to how your bankruptcy proceedings will go, so approach with caution, and consider all your options before looking at bankruptcy to discharge your debt. 

What Is The Downside Of Filing For Bankruptcy?

Bankruptcy is designed to provide a second chance for individuals and businesses.

The biggest negative to bankruptcy is the length of time it remains on your credit report. Depending on the type of bankruptcy you declare, it will show on your credit report for 7 – 10 years.

Chances are, that if you’re considering bankruptcy, your credit score probably isn’t that high now and you may see an immediate improvement in your credit score after you declare bankruptcy and make consistent payments. But don’t be fooled, despite the improvement you’re likely to have a hard time getting credit for the foreseeable future.

Alleviate Financial and Bankruptcy

In most cases, experts suggest a minimum of $15,000 worth of debt to make it worth your while in declaring bankruptcy. In all other cases it’s worth exploring debt relief services and debt settlement programs to help with your debt.

Ready to overcome your debt and make moves into a brighter financial future?

Here at Alleviate Financial Solutions, we work hard every day to get the best debt settlement and consolidation results for people in situations like yours. When you take the step with us, you can expect our debt relief services experts to deliver the relief you’ve been needing.

You’ll free yourself from your debts faster than without debt settlement, and enjoy financial freedom faster.

When paying unsecured debt like credit card debts, the interest charges can eat up most of your monthly payment adding to the time it takes to work through your debt.

Professional assistance from seasoned experts in debt consolidation can provide assurance that you’ll get the most significant reductions in your debt balances possible. Our expert credit negotiators work with creditors every day to get the lowest rates in interest charges, late fees, and over-the-limit fees so you pay less and accomplish your financial goals.

Once our team reaches an agreement with your creditors, we’ll set you up with a repayment account.

One simple payment to this account helps you budget with the peace of mind that if you stay on track until the program’s end, you’ll pay off the debt and be financially free.

As part of our commitment to your financial well-being, we help you establish intelligent financial habits to get you out of debt faster and stay out of debt long-term. Once we help you escape the grip of unsecured debt, it’s our mission to help keep you from ever finding yourself in that stressful situation again.