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Things to know about bankruptcy

By Edited Jun 24, 2015 0 0

Being bankrupt is very difficult experience for everyone. When hearing that his bankrupt, can cause people even to suffer nervous breakdown.

What is bankruptcy?

Bankruptcy is when some has so many debts that he can't repay them. Everyone can become bankrupt. A beginner entrepreneur  as well as successful and experienced businessman  can go bankrupt.

Insolvency can happen for several reasons. One of them is indebtedness.  Indebtedness can happen when people take loans from private companies and banks and can’t repay them. They take loans to finance their businesses, but because of the changing economic conditions their business did not met the projected revenue and profits. Because the loans have interest rates, the debt keeps increasing.

Other cause of indebtedness are credit card bills. Credit cards have a high interest rates, and can cause trouble at the end of the month when those bills need to be paid and the monthly income has been spend on other expenses. 

Today there are cases that an executive, a partner or a share holder to drive company into bankruptcy. The reasons for something like this can be personal dissatisfaction, revenge on other partners, squabbles among people working together etc.

Gradual loss of market share. The product or service that some company is selling for some price can be gradually replaced by a  cheaper competitive product from another company. A fall in sales means fall in revenues and profit so the company gets more and more indebted.   

However, no matter how hopeless the situation may seem to someone that is bankrupt, there is still some light on the end of the tunnel. While bankruptcy can be seen as something that has no way out, it can also be seen as a chance for new beginning. So, the question is how can you make something good out of bankruptcy?

The first step is filing a bankruptcy application. Bankruptcy application is a way of asking government for help to deal with you current  financial situation.  When your application is accepted, most of your debts will be repaid by the  government. The government will accomplish this by dividing your assets among the creditors in an organized manner. However there are some debts that can be problematic. These kinds of debts include debts that are too big to cover with available assets, and debts caused by embezzlement. When a business goes bankrupt there is a procedure that must be followed.

Other means you can use are debt consolidation services. Debt consolidation services will give you a loan at a lower rate to cover your current debts. This way people who need it can use it to pay their debt with a loan that has rate that’s within their mean and capabilities.

Whether you are asking for help from either government or debt consolidation services, you have to pass a qualification. The government or bank need to be sure that your case is legitimate. There are laws and criteria that cover this matter.

Either way, the best thing to do is seek advice from an advisor. The advisor will explain you the terms and conditions and how to get the help that you need. He will also educate you about legal and financial matters.

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