What are the consequences of filing for bankruptcy?
ashley. asked:
I recently found out that when I was about 5, my parents had to file for bankruptcy. My parents are now divorced. Since I am only 15, I don’t fully understand the concept of bankruptcy. What are the consequences of filing for bankruptcy? What are the benefits? And, What are the benefits of not filing for bankruptcy?
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I recently found out that when I was about 5, my parents had to file for bankruptcy. My parents are now divorced. Since I am only 15, I don’t fully understand the concept of bankruptcy. What are the consequences of filing for bankruptcy? What are the benefits? And, What are the benefits of not filing for bankruptcy?
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Depending on what chapter the bankruptcy was filed under, I’m assuming Chapter 7, liquidation, the bankruptcy court appoints a trustee to break up the assets owned by your parents and distribute it to creditors.
Aside from essential assets such as tools of the trade, home, etc. you lose everything to pay off any delinquencies.
There are almost no benefits to bankruptcy as it ruins your credit score and makes it almost impossible to receive a loan in the future.
Bankruptcy is only a last resort, if all other choices have been exhausted.
There are much more implications to bankruptcy I probably left out, but that’s the general stuff.
if you find yourself owing more than the value of all your assets you may file bankruptcy to seek protection from creditors. in chapter 7 bankruptcy, all your assets are seized by the trustee and liquidated and the proceeds distributed to creditors according to a complicated formula. you are immediately relieved of all your debt just like that but your credit rating is in the sewer. you will be unable to obtain credit cards, mortgages, or any kind of financial credit for ten years. and even after that the bankruptcy will hand over your head in all your financial dealings.
Filing for bankruptcy is announcing that you do not have enough money to pay off your loans, bills, etc. Your debt is erased, but you are stuck with HORRIBLE credit. And bad credit will lead to a very difficult life when you’re trying to make big purchases.