For centuries, people have chosen a path out of indebtedness that brought social stigma and disgrace not only to the debtor but to his family as well. Today, the stigma being removed by a more contemporary view of bankruptcy, we’ll see in our article post below how it’s become the preferred option for millions of people throughout the US.
Bankruptcy: Sometimes A Win-Win Situation
Depending on the type of debts incurred and a person’s situation, one can cancel all debts owed with exception of mortgage payments, student loans and child support under Chapter 7 bankruptcy filings. However, Chapter 13 filing repayment arrangements imposed by the court will encroach heavily on an individual’s income and other possible assets.
Unless a lender is a private person or relative that co-signed with a borrower, they are released from any repayment responsibility filed under Chapter 13. If filed under Chapter 7, they’ll be left with co-signer responsibilities.
That being said, a bank, mortgage company or credit card company is not in business to lose money. However, considering these entities are adequately insured for losses, the losses are many times minimized for them.
Not Always A Borrower’s Fault
Not paying a debt is reprehensible; however, many times the credit card company itself precipitated the financial crisis for a borrower. Millions of Americans were easily making their credit card payments or mortgage payments when suddenly the bottom fell out in 2008.
Yes, there were defaults on payments, but the lending companies chose instead to punish those even with an excellent payment history making their payments in a timely manner.
Even some customers who were enjoying a 3 percent interest loan payment; had no history of repayment problems; with an excellent line of credit as preferred customers; suddenly found their interest rate jump to an inconceivable rate of more than 24 percent. As a result, many people suddenly plunged into deeper debt making payments yet more difficult for them to make.
All this transpired with no regards to previous mutual agreements tagged on the credit card use or with any regards to their most outstanding customer base. Consequently, premier cardholders were punished along with those who were classified as deadbeats.
Several Favorable Factors To Filing Bankruptcies
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- Privacy Issue:Unless you’re a celebrity, few people other than the creditors will even know of your financial situation.
- Losing Everything:
Debtors don’t typically lose everything. Most people in bankruptcy proceedings usually keep everything including a house or car if they continue making payments. Every state varies and is subject to change.
- Credit Status or Ranking:
Many times, those filing for bankruptcies get new credit cards within the first 6 months after a discharge in court. All that one needs is a new account at any bank and credit card issuance is almost assured. Some even re-apply for a mortgage loan and get it within the first year after filing.
- Filing For Bankruptcy Is Easy:
Many times not even requiring an attorney to file in court, it is best to ensure your interests and use a lawyer during actual proceedings to protect your rights as a citizen.
Naturally, it’s best not to go the bankruptcy route at all. There’s nothing like being debt-free. There are ramifications involved such as not getting your credit record expunged for at least seven to ten years. However, it is a practical way out for those drowning in a sea of debt with no life preserver within reach. Choose wisely.