Avoiding Bankruptcy by Refinancing Debt
Bankruptcy is a legal process filed in Court by a bankruptcy lawyer. This bankruptcy attorney usually represents the person owing money, although less commonly one or more creditors may file suit. When a bankruptcy court approves an application for bankruptcy, it confirms that the debtor is unable to repay outstanding debt. In this case, their assets are valued and are sometimes used to pay their creditors pro-rata.
If faced with bankruptcy a troubled borrower should seek the advice of a law firm before reacting. Bankruptcy law is not straightforward and different States have subtle differences in their laws, although the opportunities open to individuals remain the same in principle. Chapter 7 of the Bankruptcy Code provides for the total liquidation of assets, which may not be the best thing for creditors either when there is no money left. For this reason, parties may agree to a Chapter 13 treaty regarding of which debt covenants reduce or extended payment periods are confirmed.
After filing for a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy, a borrower's life is never quite the same. Their credit record updates and they may no longer be able to borrow money. Even when this entry expires, they are still required to admit to bankruptcy if a lender asks - this is why consumers must avoid bankruptcy wherever possible. A stigma also attached to bankruptcy itself, and bankruptcy homes frequently sell off cheaply.
The seeds of bankruptcy are often sown because homeowners do not understand that mortgage rates may go up when economic conditions change. This means that a loan that was initially affordable suddenly requires high payments that they simply cannot afford. When that happens, they should investigate refinance opportunities, which can help them keep their homes and prevent bad credit records too. This is a far better solution than filing for bankruptcy.