What Is Bankruptcy: Things to Keep in Mind
If there are too many debts, but there is no money and nowhere to get it, you can declare yourself bankrupt. Bankruptcy is not the most pleasant prospect, but sometimes it is the only option to get rid of debts. In this article, you’ll learn about bankruptcy advantages and disadvantages.
What Is Bankruptcy?
Bankruptcy definition sounds like the ability to legally write off debts through a court. The bankruptcy procedure for individuals is regulated by the Law on Insolvency. The law applies to almost all types of debts, including loans: mortgage, consumer, car loans. But if you owe child support or have harmed someone’s life and health and have not repaid it, bankruptcy will not save you from payments.
When Can You Declare Yourself Bankrupt?
You can declare bankruptcy if you anticipate that you will not be able to pay off your debts by the due date because you are insolvent: your property and income will not be enough to satisfy the claims of creditors. Moreover, if the total amount of debts exceeded 500,000 rubles and there is no way to pay on them on time, then you are required to declare bankruptcy. In this case, a bankruptcy petition must be brought to court within 30 business days.
Are There Any Benefits of Bankruptcy?
- The issue with debts is finally resolved, you no longer have to communicate with creditors and collectors. Your debt will stop growing.
- Interest, penalties and interest on overdue loans and borrowings will cease to accrue. You cannot demand beyond what is in your property. Also, they cannot take away the only housing (if it is not in the mortgage) and basic necessities.
- You will not owe anything, even if loan debts are not fully repaid. This does not apply to alimony and compensation for harm to someone else’s life or health.
Cons of Bankruptcy
- Bankruptcy spoils business reputation and worsens credit history: it will not be easy for you to get a loan in the future.
- Others will dispose of your property and money. You can spend no more than 50 thousand rubles a month if the court does not approve you a large amount.
- Bankruptcy status is granted for five years: during this period you will be required to report bankruptcy upon receipt of a loan or a loan and you will not be able to declare yourself bankrupt again.
- Three years after bankruptcy you will not be able to participate in the management of a legal entity, including holding leadership positions.
You cannot declare yourself bankrupt yourself, this is done by the court. Your task is to submit there all the necessary documents and prove your insolvency. Your creditors or the Federal Tax Service can file a lawsuit about your bankruptcy.