Myths Busted: Bankruptcy Rumors and Myths Has Been Answered

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According to the latest reports, there are more than 200,000 companies filed bankruptcy in 2018. It is a kind of court proceeding where a court examiner checks a company’s assets and liabilities who can’t pay their dues and come up with a decision to keep those debts, or just let it go.

Bankruptcy is a scary topic and a nightmare in every business, especially if you’re not fully informed about this court proceeding. Also, there are tons of myths and rumors that circulate the word “bankruptcy.”

Reason Why Businesses File for Bankruptcy

Maybe you’re wondering what could be the reason why a company will file for bankruptcy; there are a few reasons why. In business, there will be times that you’ll have slow-paying customers, delinquent accounts, or unpaid invoices and bills. When that happens, the income from your business will freeze, which can result from business lost.

That’s the reason why most businesses fail in their first year. They don’t see this problem entirely. So, to prevent this from happening, a business or a company should ask for a third party help from Debt Collection Agency to handle all things related to debt collection. They are experts and well-experienced with different laws that vary from state to state.

Not only they will help your company to collect unpaid payments, but they will also save your company from going bankrupt.

To help you ease digesting the information between fact-based and fictions, below are the biggest lies around bankruptcy.

Myth Busted #1: Forget All Debts

In bankruptcy, there are some exceptions. Ideally, you cannot let go of a debt that is already deemed personally, such as child support and student loans. The debts that you clear off immediately are credit cards, personal loans, and medical bills.

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Myth Busted #2: It Damages Your Financial Stability

There’s no proof that bankruptcy can damage your financial stability, though there are few consequences.

For those companies who file for bankruptcy can affect their capability to get credit, and sometimes they are highly subjected to a higher interest. Though, this status can be removed from your credit score seven to ten years later.

Myth Busted #3: Bankruptcy is Always a Bad Choice

It is given that the decision to come up with bankruptcy is never an easy choice. But it doesn’t mean that bankruptcy is always a bad idea. In some cases, filing for bankruptcy could be the best choice for your current company’s situation.

Like for example, if your business income to debt has a ratio of 1:2 or more, filing for bankruptcy in advance could save your business to survive debt-free.

Myth Busted #4: Bankruptcy Loses Everything

Indeed, bankruptcy is the hardest decision in every business, but it doesn’t mean that it’s the end. For most people, they believe that filing for bankruptcy forces you to give all your assets, such as a car, house, and other properties.

But in reality, in most cases of bankruptcy, there are no-assets involve. Meaning, the debtors are not forced to give any properties or possessions to creditors. Though, the value of your assets will help for a repayment plan.