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If you are in severe financial difficulty and are considering going bankrupt, no doubt you will have many questions. Here we will tell you more about what bankruptcy is.
Bankrupty is a form of insolvency and is normally only suitable if you can’t pay back your debts in a reasonable time. Assets you own, such as your house or car, will usually be sold to pay off your debts. So if your assets are worth more than your debts, or if all of your regular payments are up to date and you can afford to keep paying them, bankruptcy is unlikely to be the best option for you.
After you have been declared bankrupt, your creditors will write off your unsecured debts. This allows you to make a fresh start. But there are restrictions for the 12 month period of bankruptcy. You will be notified when it ends, which is called being ‘discharged’.
Those who have faced financial hardship know how difficult it is to deal with debt. Fortunately for many debtors, bankruptcy can provide a way out. Bankruptcy is designed to give debtors a financial fresh start by eliminating most debts in one fell swoop. However, it isn't a walk in the park. In order to receive a debt discharge, debtors are typically required to make major sacrifices, such as liquidating their assets, or forfeiting a percentage of their income.
It's important to understand what "declaring bankruptcy" really means, and the consequences of doing so. The process essentially releases the debtor from personal liability for certain debts through a court order. The discharge also prohibits creditors or collections agencies from communicating with debtors. But when you declare bankruptcy, it can substantially hurt your credit rating and limit your financial options going forward.