Factors Influencing Bankruptcy

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Factors Influencing Bankruptcy :

The following factors seem to influence bankruptcy, in general. But a combination of all these factors is however found to have greater impact on Bankruptcy.

1. Rising Unemployment: Unemployment or sudden loss of job is a key factor influencing bankruptcy. In order to maintain an optimum standard of living, unemployed people are more prone to taking debt without the ability to pay back. Thus accumulated debt level rapidly increases resulting into Bankruptcy.
2. Broken Marriage: Rising divorce rates are seen to have influenced the number of bankruptcy filings. This is because in most cases one or both the parties suffer financially due to legal separation.
3. Credit Card Usage: The more the number of cards, the more will be the amount of debt. With the increase in the number of accounts used by each adult, the rate of filing bankruptcy also increases.
4. Debt Income Ratio: Debt :. With the rise in debt-income ratio, rate of filing bankruptcy also increases.

Myths about Bankruptcy :

Bankruptcy may seem to promise a lot on the surface, but deep down it solves the debt problems, only with a lot of damages. Here is a listing of certain common misconceptions about Bankruptcy:

1. Get rid of all debts: Don't ever think that bankruptcy can help you take care of all debts. There are some debts that cannot be discharged under a bankruptcy proceeding. Most of the tax claims, alimony, child support etc. are just a few examples.
2. Fresh Start: Bankruptcy relieves the pressures of debt temporarily. It doesn't offer a fresh start as the status of bankrupt reflects in the credit & court reports for the next 10 or 20 years respectively. Creditors and dealers discard loan applications in the first place. And even if they grant you loan in the future, they take advantage of this by charging high interest rates.
3. Include only selected Accounts: If you think that you have the freedom of hiding any account and not including it while filing for bankruptcy, you are absolutely wrong. The bankruptcy laws are very strict on this point and any such fraud is punishable. You can keep accounts away from bankruptcy filing only if you can pay them off fully before filing bankruptcy.
4. Ease in filing: The process of bankruptcy is not as easy as it seems to be. It is very time consuming. Moreover with the changes in the statutory laws, it may not be that easy to file for bankruptcy.
5. Debts wiped out for free: The process of Bankruptcy makes one debt free either by liquidating one's assets or by putting him into a new repayment scheme.