Is The Bankruptcy Option Better Than a Payday Loan?
Thousands of people around the globe are affected by the financial crisis that is being caused by the economic recession. Jobs have been lost as most companies have decided to downsize. They must lay off their staff in order to effectively continue to perform and keep their business alive. Those that have realized they could not continue to perform and keep their operation successfully intact have decided to shut down operations instead of operating at massive losses. Creditors, on the other hand, have not been left behind. They are assiduously harassing debtors to settle their debts. All the above have led to the ‘bold’ step of embracing bankruptcy.
Bankruptcy is the inability of an individual or an organization to pay its creditors. In reality, it is a legal proceeding where a person petitions the court of law and declares his inability to pay off outstanding debts. Typically, this ‘bold’ move protects the individual from the creditors.
United States Bankruptcy Code outlines four detailed types of bankruptcy.
- Chapter 7 is the most common and it stipulates that the debtor should sell his non-exempted assets and turn over the proceeds to the creditors.
- Chapter 11 is ideally for business merchants who wish to restructure what they owe others and keep running the business while paying off their debts after an agreed upon duration and amount.
- Chapter 12 – Very similar to Chapter 11, the only difference is that they deal with needs of farmers and fishermen that possess a steady income.
- Chapter 13 – This is a typical debt consolidation plan that stretches up to four days.
Effects of Bankruptcy
The obvious effect of declaring bankruptcy is the material effect since the individual will have sold his non-exempted assets, which would result into hopeless poverty. There is a limit on the available credit for people that have been declared bankrupt, which is equivalent to $250 or more, alone or jointly.
The psychological fall out has further reaching effects than the monetary ones. The individual may suffer from inferiority complex by losing his or her previous status in society; hence, distorting his social habits and may prosper into drug and substance abuse. The bankrupt individual is stigmatized and is not allowed to hold any public office.
Individuals that turn to the solution of bankruptcy may not be in a position to conduct business directly or indirectly except under the business in which he claimed bankruptcy. Bankruptcy is an option for people who really need it. While a Payday Loan will not forestall a bankruptcy, it is important to look at all of your options before filing
