When one should file for Bankruptcy?
- Blog|Insolvency and Bankruptcy Code|
- 3 Min Read
- By Taxmann
- Last Updated on 22 January, 2021
When to file for Bankruptcy?
Bankruptcy is a situation when your assets are not enough to pay off your liabilities, but this could be in many situations. Bankruptcy should only be applicable to you when your creditors have lined up in front of your door and you are taking up more loans to pay off your previous ones and it have become a never-ending cycle of loans. It also good to file for bankruptcy when your assets are not good enough to hold for long and with them being sold you can still make a living for yourself. Like in a situation when your house is under water and is in a danger of foreclosure. In India, bankruptcy is a stigma, when you file for bankruptcy or even researching on how to file for bankruptcy, your friends start to avoid you and not only you are ripped off financially, but you are also ripped off from your whole social life. You credit report have it for next ten years, hence you are barred from taking up any more loans or any kind of jobs that evaluate your credit limit in order to screen you. Also, you need to think of whether you will be able to make enough for your living so that you can support yourself with a house and other basic-need items after court have ordered to sell off all your assets to pay off the creditors’ amount. While researching on how to file for bankruptcy, you must be aware of that in India, the bankruptcy laws are strict, and they do not consider anything about your accommodation and other expenses while dealing with your bankruptcy case. Only benefit you will find while researching on how to file for bankruptcy is that you don’t have to face the threatening calls from your creditor. By law they are barred from calling you again and again and making your life a hell. As the court would suggest, you will have to follow that procedure to pay off your loans and debts. Also, you don’t even have to serve any kind of jail, as being bankrupt is not a crime. However, bankruptcy could be a long procedure where you must pay your lawyers fee and mostly it is an hourly rate.
Things you could consider before filing for bankruptcy:
While researching on how to file for bankruptcy, first see if you could get less expensive loans like from your friends and family to pay off your creditors, or could you work it off with your creditor to make the loans less painful and extend your time limit in which you could pay off those loans. You should also check if you are following any sort of budget to get off this situation. The bad credits situation is often seen in cases where the individual has not been following a budget and is spending relentlessly on living his luxurious life. See if your pay hike in recent times would help you pay off your debts better and whether you will be able to pay them off in recent future. Also, bankruptcy is not the end of the road. You still have your skills and knowledge backing you up and could be a good thing to make a fresh start.
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