Debt and bankruptcy become synonymous when credit amount is more than the assets’ value and it becomes evident that paying back the debt is not possible. Though financial counseling and debt consolidation are valid alternatives offering different schemes of payments, an increasing number of people are opting for bankruptcy. In fact, as per the data released by the government, more than one million US citizens filed for bankruptcy in 2008.
While it’s true that bankruptcy provides much required protection from the creditors’ onslaught, it also has some serious implications on your credit. As per different laws in different countries, bankruptcy could result in all or a few of the following restrictions:
· Loss of control over your assets.
· Need to take permission from the creditor before you get credit.
· Not being allowed to be a company director.
· Not being allowed to take part in promotion, management or formation of a limited company without court’s permission.
· Denial of trading in any business (even under another name) without informing all the creditors and people concerned with the case.
· Not being allowed to practice as a charted accountant or lawyer.
· Not being allowed to act as a Justice of Peace (JP).
· Not eligible for being a member of parliament.
· Not eligible to become a member of the local authority.
· May be asked for a public examination in courts.
Besides all these, in most countries, the bankruptcy stays on your credit report for 10 years at least.
Avoid impulse shopping and devise a budget that helps you in saving some cash for repayments. For this, you may take professional help or note down your income and expenditure on paper and identify expenditure that can be reduced. You can also use saving accounts to generate some interest for repayments. Avoiding balance transfers and cash advances from a credit card since they attract higher interest rates and add to your debt. Remember, the only way to differentiate between debt and bankruptcy is timely payments and keeping the debt down to a manageable amount.
