Bankruptcy is not the end of the world. Indeed, views towards bankruptcy have changed over the years, yet misconceptions still exist. Whereas at one time bankruptcy was considered a moral evil from which one could never escape, today the perception exists that bankruptcy allows swindlers off the hook with the snapping of a finger or the waving of a magic want. Let’s take a look at the realities of declaring bankruptcy.
First, bankruptcy is not an end, but more like a beginning, or a new start. Declaring bankruptcy provides debtors protection from creditors until a bankruptcy trustee can negotiate manageable payment terms. The end result should be that everyone wins. Creditors get paid, while debtors are able to make those payments and, if done successfully, eventually get a fresh start.
A fresh start
And it is a fresh start that one can get after filing for bankruptcy, although it might take some time. It should be noted that one’s credit record will almost certainly already be in trouble with the accumulation of significant debt, and can still remain in trouble after payment. Bankruptcy, on the other hand, will be removed from one’s credit history after a few years, depending on the province of residency.
Although the stigma of declaring bankruptcy isn’t as strong as it might once have been, the stigma still exists. Most of us have seen those ads in the papers providing notices about someone’s bankruptcy. None of us want to have that kind of spotlight placed on us. However, these kinds of notices usually only occur for very large debtors. Otherwise, communications among creditors, debtors and bankruptcy trustees usually occur in private.
No walk in the park
At the same time, however, bankruptcy is no walk in the park, either. As alluded to above, it doesn’t simply involve the waving of a magic wand that results in wiping the slate completely clean. On the contrary, bankruptcy often involves tough negotiations with creditors, remains on one’s credit history for years, and sometimes can’t discharge secured debts such as mortgages or child support.
Ultimately, bankruptcy can be a useful tool to deal with serious debt, but is a remedy to be avoided through sound financial management.
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