One of the most pressing dangers for anybody suffering from a debt situation is the possibility of going bankrupt – and this can have serious financial implications for you, if you end up going down that route. Bankruptcy is something many people recognize is a big danger without actually knowing the implications of it – and we’ll go through a few of these below. At Debt Consolidation Dallas, Texas, we can provide debt management strategies to avoid bankruptcy, but it’s also possible that this is the best option for your financial situation, and we’re able to take you through the steps to get it completed. For more information on bankruptcy, and just why you need to give it serious consideration, read on below.
What is bankruptcy?
So, what exactly is bankruptcy, and why does it have such negative associations? Going bankrupt is where you renege on debts that you owe to your creditors by declaring that you are unable to make further payments. This is enforced through a court order, and while it mainly happens because the debtor initiates the process, it’s also possible that the creditor (or creditors) who are seeking money from you could file a motion to see you registered as bankrupt. There are both pros and cons when it comes to bankruptcy, so examining whether this is the right path for you requires serious and careful consideration.
Which Debts Are Covered
When you file for bankruptcy, you do so because you’re seeking relief from the various debts that you owe to creditors – debts that you feel that you’re no longer able to handle. Bankruptcy eliminates the need for you to repay certain kinds of debts, or gives you more management payment schemes and options to relieve you from the relentless pressure – but not every kind of debt is covered. While something like credit card debt is typically taken away, child support payments (for example) are far more likely to remain, since they’re considered too important to be wiped clear. If you’re looking at the possibility of filing for bankruptcy, you need to carefully examine the debts that you have to see what you’ll still owe on.
If you decide to file for bankruptcy, you’ll gain some relief from the debts that you owe to your creditors, but you’ll also suffer some negative consequences. One of these is that your credit score will be seriously affected – and it’ll make it very unlikely that you’re able to find loans or mortgages for a long period of time. While it is possible to secure loans in these situations sometimes, they’ll come with very unfavorable conditions.
Risks of Property Loss
Another significant risk when it comes to bankruptcy is the potential loss of your assets. Anything valuable might be up for grabs for the creditors, although there are exemptions on items that you need to live and work. It’s possible that your home could be taken, but again, you might be able to gain an exemption in this regard. We can assess the likelihood of these losses, and the implications for your credit, before you make any decisions.