This lesson defines bankruptcy and covers some important information about the consequences and long-lasting effects for those who declare bankruptcy.
Use the following information to define bankruptcy for your students and explain the seriousness and long-lasting consequences related to declaring bankruptcy.
From Use Credit Wisely 2005- Citi…
Bankruptcy is a legal declaration of your inability to pay your debts.
Filing for bankruptcy provides you with protection under a Federal bankruptcy code that can save some of your assets, keep your creditors on hold, and provide you with the help of a professional (such as an attorney or a court-appointed trustee) to sort out the situation. It is an option, but is it the best option for you?
To some people, bankruptcy seems less damaging these days. They see big corporations using bankruptcy and decide that it must be okay. But the consequences of personal bankruptcy are serious and long lasting.
Bankruptcy should be viewed as a last resort, not as a natural outcome of a credit crisis. Usually there are far less drastic solutions available. Here are some facts to keep in mind if you are considering bankruptcy:
- Bankruptcy will remain on your credit report for up to 10 years.
- It may affect your ability to rent or buy a house.
- It may impact your ability to obtain future credit, including credit cards.
- You will not be excused from certain debts, including Federal Student Loans, IRS debt, and child support.
- Your pension or profit-sharing plan may be affected.
- It may affect your living standard by denying you the privilege of using credit to purchase necessary items such as large appliances, plane and car reservations, etc.
- It may impact your career if a future employer questions your attitude toward responsibility.
While declaring bankruptcy may provide a fresh start the negatives often far outweigh this positive. You should, therefore, exhaust every alternative to meeting your financial obligations before considering bankruptcy.
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