• Helps manage unmanageable debt
  • Stop collection calls
  • A free consultation is available.

Paying off loans is the primary responsibility of borrowers. When they take foam banks, they are expected to pay it off as per the agreement. However, individuals find it difficult to repay the loan as required for multiple reasons. Unemployment, reduced income, and excessive debt burden result in the need for more funds individuals need to repay the loan. In such a situation, they can apply for bankruptcy. Let’s gather more information about it.

What Exactly is Bankruptcy?

In simple words, bankruptcy is a legal status in which borrowers declare they don’t have sufficient funds to pay off all the existing loans. It involves Court proceedings, and regulatory authorities may use the assets of an insolvent person or company to settle the debt. The debtor is given relief from further loan collection calls.

How To Know I Should File For Bankruptcy?

Always keep in mind that filing for bankruptcy is an important financial decision. You should contact a bankruptcy attorney and discuss your situation honestly before deciding. Some factors, such as the massive debt, inability to pay bills, and legal action from banks, indicate that you should go for bankruptcy.

How Does Bankruptcy Work in South Africa? 

When a person or business organization decides to apply for bankruptcy in South Africa, their actions are guided by the Insolvency Act. They need to surrender their assets to the trustee. The trust members estimate the asset’s overall cost and sell it to pay off the loan. Besides this, creditors can take the court’s help to declare someone bankrupt. During the bankruptcy period, the trust manages all the financial issues of the insolvent individual or company. Once the bankruptcy period ends, they can make a fresh start, but some loans may persist. In this situation, they should seek legal advice to protect their interests.

What Are The Main Advantages of Filing For Bankruptcy? 

For many individuals and companies, bankruptcy offers a viable solution to unmanageable debts. Here are some major advantages of filing for bankruptcy:

  • Relief From Debt Burden

The potential discharge from some loans is one of the main reasons many individuals and business organizations apply for bankruptcy. For example- filing for Chapter 7 bankruptcy will enable you to eliminate unsecured loans and medical bills. It provides them immense mental relief. They can focus on building their finances once again.

  • Automatic Stay:

When you apply for bankruptcy, an automatic stay is effective, preventing creditors from pursuing their collection calls. They are temporarily prohibited from garnishing salaries, making collection calls, and starting lawsuits. It provides much-needed relief to individuals and business organizations, enabling them to assess their financial situation and find a more sustainable solution to the problem.

  • Asset Protection

Bankruptcy laws offer exemptions that allow individuals to protect their valuable assets from liquidation. It ensures that not all assets are at risk during the bankruptcy process. Depending upon the bankruptcy you have applied for, you can own the primary residence, personal belongings, and some equity in the vehicle. It allows them to maintain stability while restructuring their finances.

  • Financial Education:

Remember that bankruptcy proceedings usually involve mandatory financial counseling. It helps individuals and business organizations understand the factors that led to their financial difficulties and provides tools to avoid similar issues in the future. 

What Are The Main Distantages Of Bankruptcy?

  • Negative Impact On Your Credit Score

When you file for bankruptcy, its impact will display on your credit score for at least ten years, making it difficult to get new loans during this period. Even if you somehow manage To get a loan from a bank or any online lender, Interest rates are likely to be higher. It reflects the risk associated with bankruptcy. 

  • Asset Liquidation

In many bankruptcy cases, your assets may be liquidated to repay creditors. In such a situation, you can lose access to expensive valuables such as homes, vehicles, Bank deposits, and other personal belongings. 

  • Problems in social life

When an individual declares himself bankrupt, apart from financial problems, he faces social Criticism and comments for his inability to manage finances. 

  • Negative Impact On Business

When a company becomes bankrupt, It may have to close its operations, lay off working professionals, and face damage to its prestige in the market.  Consider all these factors carefully, consult an expert bankruptcy lawyer, and take an appropriate decision as per your situation.