Advantages of bankruptcy
If you are truly convinced that you are unable to pay your debts and there is no way out, then you should apply for bankruptcy. For example, if a fire occurred due to short circuit and destroyed your vital assets or some similar tragedy caused a financial deprivation disabling you to repay your debts, there is nothing you can do about but opt for bankruptcy.
First and foremost, it is important to point out that bankruptcy is no longer a social stigma. Look around and you will many companies going bankrupt due to the present financial melt down. You may find it interesting to note that some of the world’s most famous public figures including artists, statesmen, businessmen, musicians, literary figures and even the presidents of the US went bankrupt. These celebrities include Oscar Wilde, English poet and author, Walt Disney, the founder of Disney, William C. Durant of General Motors, William Fox of 20th Century Fox, Willie Nelson, singer, Wolfgang Amadeus Mozart, composer and above all, Abraham Lincoln and Ulysses S. Grant.
Bankruptcy allows you a way out of a difficult situation especially when you find that there is no way that you will be able to pay your debts. Once you file for bankruptcy you would not have to pay your creditors. So the greatest advantage from bankruptcy is that you can become debt free in a relatively shorter period of time.
With the amendment of the Enterprise Act 2002 in 2004, the period of discharge from bankruptcy has been reduced from earlier three years to one year only. Some of the advantages of bankruptcy are:
- Most of your debts, except some secured debts, are wiped out. Those that are wiped out include unsecured debts incurred through credit cards and medical bills.
- Your assets are equitably distributed among your creditors so that you are free from any sense of guilt or moral compunctions.
- You stop receiving threatening phone calls and letters from your creditors. Once you are declared bankrupt, your creditors have to deal directly with the court appointed Official Receiver or Insolvency practitioner.
- Once you declare bankruptcy, your assets are distributed between your creditors. So this way your creditors are also happy that atleast they get back some part of their money.
- You can make a fresh start after the term of your bankruptcy, which is usually one year as per the amended act.
- You can retain your personal belongings such as car, household goods, books and professional tools and also some part of your regular income to pull through the difficult time.
- What you actually pay back in debt is much less than what you would have to pay with other methods of debt management or dealing with your creditors all by yourself.