Filing for bankruptcy is the last resort people and businesses want to be reduced to. There are several reasons for this. On the other hand, some view this as a way out of a sticky situation. We will discuss the debate on whether bankruptcy is an instrument of liberty or not. The answer to this can vary widely based on your situation. So, let’s look at both sides before coming to any conclusions. However, first, let’s understand what bankruptcy is.
What is Bankruptcy?
In the eyes of the law, bankruptcy is a legal process in which the liabilities and assets of an individual or firm are weighed to decide whether the individual can still pay off their debt or if they should be legally exempt from this. However, an individual or business must file for bankruptcy before the court considers their plea. This can be done in two ways. A person can file for bankruptcy on their own, or they can hire an attorney to do it.
If the court does declare you bankrupt, they will take control of all or most of your assets to pay off your creditors. Not only will your creditors be unable to contact you to ask for what you owe them, but you will also be declared debt-free. The only dues not cleared on your behalf are the loans you co-signed with someone, student loans, alimony, child support, or money you owe to the government, such as unpaid taxes, penalties, and fines. You will further have to pay for the case of bankruptcy to be filed in court.
Pros of Filing for Bankruptcy
In some cases, it is a good idea to file for bankruptcy due to the following reasons:
- You will legally become debt-free
- Lenders will no longer pester you
- You will get a fresh start
Cons of Filing for Bankruptcy
Filing for bankruptcy has a lot of disadvantages as well that need to be taken into consideration, such as:
- Your property, bank accounts, and other assets might be sold off or seized to pay off your debts
- Your bankruptcy will become public domain that can be easily accessed through the court records
- It will become harder to secure a mortgage
Is Bankruptcy an Instrument for Liberty?
In our opinion, bankruptcy can sometimes be an instrument for liberty. If you are under a ton of debt, your assets aren’t sufficient to pay them off, and lenders filing for bankruptcy are constantly nagging you, it is the right option. However, even after declaring bankruptcy, your creditors are not guaranteed to stop bugging you. Secondly, you will have no assets to fall back on after filing for bankruptcy. You will have to rebuild your life from scratch unless it is in the case of huge multinationals that will just need some restructuring, cost-cutting, bookkeeping scrutiny, and a few tough decisions made in the ownership.
On top of this, your bankruptcy will become a matter of public record that can easily be accessed by potential lenders, landlords, and employers. You might have a more challenging time renting or getting a loan. Landlords and banks may assume you are a liability and will have difficulty paying your dues. Yet, are these issues a problem compared to your mounting debt? If you have nothing left to lose and no way out, the only option to free yourself may be declaring bankruptcy.
Will You Be Free after Filing for Bankruptcy?
Filing for bankruptcy is just the tip of the iceberg. Not only will you have to pay to file the case, but if you aren’t filing the case yourself, you will also have to hire and bear attorney’s fees, which will cost you a decent amount of money. Going to court and simply stating that you’re broke isn’t enough. As ironic as it sounds, you must pay to declare that you don’t have money.
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