Personal Bankruptcy: To Declare Or Not To Declare?

personal bankruptcyHave you ever wondered what personal bankruptcy leads to? To understand the consequences of declaring personal bankruptcy it is important to understand what the phenomenon is.

What is personal bankruptcy?

Essentially, personal bankruptcy is a legal procedure that protects individuals who are unable to pay off their debt.

Does that mean that anyone who does not want to pay a credit card bill can declare bankruptcy?

Absolutely not! Before declaring personal bankruptcy one must see that the value of all their assets put together is less than the debt. This means that the person is incapable of selling his assets to pay off the debts. At the same time there is very little chance of the person acquiring enough money to be able to pay off the debt in the foreseeable future. One can try to negotiate terms with the lenders to see if the debt can be paid in smaller sums or if it can be repaid in any other way. Finally if there is no way to pay off the debts then a person is forced to declare bankruptcy.

Personal bankruptcy law is what ensures that every other person does not declare bankruptcy to escape debt payments.

What can lead to personal bankruptcy?

Having more debt than you can pay for is no longer a rare occurrence. Today we see that more and more individuals are filing for bankruptcy. Why has this become a more frequent occurrence?

The answer lies in the fact that there are more goods and services out there than people can afford. In an effort to better one’s standard of living people try accumulate more wealth. When a person fails to earn the amount of money that they need to keep up their standard of living, they turn to loans. Be it from banks or be it from individual lenders, once a sum is loaned it becomes an extra financial burden. Apart from loans we see that credit cards act more as a trap instead of a life line. When you charge anything to your credit card you are adding the sum to the credit card bill that you have to pay at the end of the month. By losing track, of how much you are charging to your card, you are increasing the amount that you need to repay.

If you are unable to pay back the debts or the bills then you might have to part with some assets. But at times the assets fall short of the amount that needs to be repaid. At that point of time one has to negotiate with the banks or the lenders to try and extend the due dates. A shift in the due date might not be helpful if you have to take more loans to clear the debt or bills. The creation of a vicious debt cycle can happen if you keep borrowing money. Finally, if you see that you are in over your head with debt then it is time to look for personal bankruptcy attorneys.


Personal bankruptcy filing can seem like a boon when you are struggling to pay back the loans and bills. End of the day personal bankruptcy filing is a last resort that has a number of drawbacks. Here are the main drawbacks that deter most from filing for bankruptcy:

  • If you have filed for personal bankruptcy then it goes straight to your credit history. This means that your state of bankruptcy will show on your credit report. The effects of this can be devastating to your life. In times of need you might no longer be granted a loan since you have bad credit history. Employment can become hard as well, since employers who do background checks might reject your application based on the bankruptcy that you had filed for.
  • Apart from the inability to take loans you might no longer be able to possess a credit card. When your bank notes that you have filed for bankruptcy, they shut down your account. Hence your credit card becomes inactive. If you want to get another card then you might have to apply to another bank. Your application can be rejected based on your state of bankruptcy that you had filed. So, you have to spend years without owning a credit card.
  • Your credit history might not be the only thing shot to pieces. Most people look down upon the state of bankruptcy. This can have a major effect on your personal life. Many have spiraled into depression after filing for bankruptcy. You might face difficulties in your personal life if you have to file for bankruptcy.

To lawyer up or not?

Filing for personal bankruptcy can be a tedious process. There are many nittygritties that you need to take care of when filing. If you get any of the formalities wrong then the consequences can be devastating. Knowing all the personal bankruptcy rulesmight not be your cup for tea. This is why most people hire personal bankruptcy attorneys to do the job for them. You need to just give them your credit details and they can set everything in order and file it for you.

Though it might be more convenient to hire lawyer, you might no longer be able to afford it. Even if you are bankrupt the lawyers are sure to charge their usual rate. If you cannot afford a lawyer then try to get the filing done by yourself. Do not add to your financial pressure by hiring a lawyer.