Bankruptcy doesn't occur due to reckless spending; it is usually caused when a low-earning individual cannot deal with an unexpected financial setback. From 1980 to 2005, the number of bankruptcy cases has steadily increased in the United States. An all-time high value was recorded in 2005 when 2 million cases of bankruptcy were reported.
LendingTree carried out a study on the one million users it offered loans during 2017. It was found that 65% of the people had a credit score of 640 or more just within 2 years. This emphasizes the fact that reviving yourself financially after facing a monetary downfall is quite possible.
The economic recession of 2008 brought down biggies like General Motors, which has been operating for almost a century. On its 100th year anniversary, it had a debt of more than $30 billion. In June 2009, it filed for bankruptcy with the aid of government funding and made an initial public offering in 2010.
Before one can understand how to get back on track after bankruptcy, it is important to know its various types. The economists have given six different types but only two hold meaning for individuals and couples. These two are Chapter 7 and Chapter 13. The former is also called liquidation bankruptcy as some of your assets can be sold whereas the latter allows you to reorganize your finances.
A very interesting fact to remember is that individuals form the vast majority of filers, not businesses. Back in 1980, the companies formed 13% of all bankruptcies but currently, this has reduced to only 3%. The most common causes of bankruptcies include job loss, medical emergency, divorce, or credit debt.
Consumers who choose to file for bankruptcy tend to do better after 5 to 10 years as compared to those who stay in debt. In fact, a number of filers enjoy full-time employment at some point in their lives after claiming bankruptcy. The U.S. court statistics reveal that 91% of Americans will hire an attorney to help them fight the case.
One must review all their assets and debts before giving a shot to filing for bankruptcy. While it may feel like a direct help from God, there are repercussions which one must be prepared for. You may even lose your home if it is in foreclosure in a Chapter 7 bankruptcy.
It is hard to imagine that Marvel Entertainment, which is the highest grossing franchise, filed for bankruptcy in 1996. It was when the company solely relied on their comics and wasn't into the movie-making business. Now, it owns billions of dollars as well as boats a huge fan following throughout the world.
Considering these examples, one should keep an optimistic approach as they file for bankruptcy. You will face a financial blow and struggle for some time, but if headed in the right direction, things do start to get better with time. Just ensure that the improving score doesn't lead you to debt one more time.