Bankruptcy is a concern among many people. When there are outstanding amounts that cannot be paid then people often end up filing for bankruptcy. There are different kinds of bankruptcy such as chapter 7, chapter 11 and chapter 13 bankruptcy. When an individual files for bankruptcy and cannot afford their debts, then a part of their assets are liquidated to pay for some of the amount and then is relieved of the remaining debt.
Bankruptcy allows for a fresh start and people can also allows for refinancing options to save the business and then eventually settle the debt. Although filing for bankruptcy allows people to relieve themselves of their outstanding amounts it does involve a lot of procedures. Firstly the person who files for bankruptcy will have to compulsorily attend credit counseling. There are also laws in place requiring people to attend financial management classes and repayment of some of the debt over a period of time. There is also the biggest consequence which is a bad credit rating. This can make it virtually impossible to get financial help from creditors and lenders going forward.
Filing for bankruptcy is not an automatic end to all problems, there can be a lot of repercussions to it. You cannot borrow money from creditors for over 7 years and there will be high interest rates which makes it difficult to pay up on them landing you in even worse debts. You may even have eviction notices and lawsuits filed against you to deal with. All further transactions are frozen by law until further notice, it is an action recommended only in extreme cases if debtors are harassing you to no end and there is no other way out.
Avoiding bankruptcy is a better idea. You can cut down on spending and save as much as you can to avoid filing for a bankruptcy. There are also debt consolidation options but this should not be an option offering you another spending spree. Take a second job, make ends meet and put aside money unscrupulously to deal with your financial issues.
It is important to also stop using credit cards, they have interest rates and you already have enough debt, do not purchase anything except the bare essentials you need. Save and scrimp your way free from debt.
The laws regarding bankruptcy are different in different states however they have a common consequence of sinking your chances of getting credit with your debtors and black lists you for good in the business world.