Question

Bankruptcy has its own courts, and they are federal courts, and therefore supersede any state law. Think about and discuss the potential financial implications to an individual or a business before, during, or after filing for bankruptcy.

Answer 1

Before bankruptcy

When such case enters the court, all the transactions are stopped immediately and those creditors who are asking for money will not be able to disturb the company or individual. They cannot send notices or call the person. Thus it immediately protect from creditors seeking to collect the debt.

During bankruptcy

During the case that is still pending in court, no creditor can disturb the individuals as well company to pay the debt. Company cannot undertake any activity regarding collection of any amount from debtors even.

After bankruptcy

A company dissolves after

Credit score of the person decreases, even if debt is paid off there will be a history of past debts. Lenders will not lend money easily as for them , the individual is a riskier borrower and if someone lend the money, it will be at a higher rate of interest.

Some personal assets can be used to pay off the debt . So, there is a risk for personal properties. Such properties could be seized by the court.

There is a negative image in society for the individuals who were involved therein. Individual may loose its personal property to pay off the debt.

Some debts are waived off like credit card debt.

Some personal properties are exempted and creditors cannot undertake that property. Assets/properties of family members are protected as they have no relation with company.

It becomes difficult to obtain loan in future