Filing for bankruptcy may not be such a bad thing to do after all. As a result of high inflation, more and more South Africans are finding themselves with insurmountable debt. If you’re deeply in debt, filing for bankruptcy could allow you to rebuild your financial life. However, this is something to consider only after you’ve exhausted all other options.
But of course with the pros of anything in life there are always surely cons too. Here’s what you should know about the pros and cons of filing for bankruptcy.
The Pros are:
- Filing for bankruptcy is the only debt remedy that can relieve you of up to 80 percent of your debt fairly quickly; other debt repayment programs can take upwards of 6 years.
- If you don’t have any debt that will survive bankruptcy proceedings such as a mortgagethis is the quickest way to get rid of debt.
- Once you’re declared insolvent, creditors are no longer able to pursue you directly for payment.
- One of the benefits of voluntary sequestration is that you’ll not have to pay high interest rates on the remainder of the debt. As such, you can become completely debt free in a relatively short period.
- It’s possible to declare yourself bankrupt, if you don’t have immovableproperty, provided that you’ve enough assets to ensure therealisation of sufficient benefit for the creditors.
The cons are:
- You may lose your assets, other than certain assets you can show are necessary for your work.
- Filing for bankruptcy will tarnish your credit rating for up to 10 years, making it difficult or very expensive to get traditional loans.
- Some types of debt, like home and car loans, won’t simply go away. Filing for bankruptcy will only eliminate your personal liability for a secured debt, and won’t erase the creditor’s security interest in the asset.
- You may not be a director in a company until the courts declare that you’ve been rehabilitated.
- Bankruptcy adds a serious black mark against your credit report that will follow you for some time to come.