The subprime crisis which led to the economic slowdown about two years back has left in its wake a lot of serious problems for many people. Prior to the crisis, people could take loans even if they did not qualify for it and banks as well as financial institutions were only too happy to lend to them. This resulted in many people taking undue advantage of the situation and leveraging themselves beyond reasonable means of repayment. It led to many individuals borrowing to buy houses, expensive cars and other such capital items.
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The problems started when the value of the houses started dropping and there were no takers for them. People who had borrowed now found themselves saddled with an asset that had no takers and by this time the financial institutions too found themselves unable to recover any repayment from individuals. This led to the collapse of some of the most well known financial institutions. People lost their jobs and many of the houses were forcibly repossessed. As for cars, they were anyways depreciating assets and people wanting to sell them still did not find others interested in buying them.
With many companies laying off staff or ordering pay cuts, the spectre of bankruptcy loomed large in many households and they had to declare themselves as bankrupt in order to buy time from creditors. The bankruptcy procedure is such that the affected person makes an appeal to the court through which he expresses his inability to meet his debt obligations despite his best attempts. Doing this, such individuals can avoid any penal action from the creditors and unfortunately bankruptcy filing is at its peak. People are seeing no other option but to file under many new rules.
This condition is a difficult one in anybody's life and it is a serious blow to his self-esteem. Fortunately, it need not be a long one and you can make a fresh start to slowly claw back and take the responsibility of paying back the due amount. The period of bankruptcy is a temporary reprieve and should be utilised by the affected individual to introspect and come up with some plan to tide over the situation. It is an opportunity for the debtor to make a fresh start.
Bankruptcy can be voluntary as well as involuntary. In the case of the latter, the creditors request that the debtor be declared bankrupt so that they can explore other options of collecting their money.
It is the duty of the debtor to cooperate with the creditors during the period of bankruptcy even if he or she does not agree with all the claims made by the creditors. Not doing so will further dent the reputation and can only lead to problems in the future.
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