Pros and cons of filing for bankruptcy

Bankruptcy is a phenomenon in which an individual or company cannot pay its debts and seeks legal protection from creditors. Filing for bankruptcy is a complex decision that has its pros and cons. In this article, we will look at the main advantages and disadvantages associated with the bankruptcy process.

Advantages of filing bankruptcy

Protection from creditors

One of the biggest benefits of filing for bankruptcy is getting legal protection from creditors. This means that you will be freed from debts that you cannot pay, as well as from constant harassment and threats from them. During the bankruptcy process, the court issues a decision imposing a moratorium on the actions of creditors. This means that your property and bank accounts cannot be seized, creditors are deprived of the right to make further accruals on loans. You get some temporal and legal stability to resolve the case in court.

It is possible to restore solvency in a legal manner

Filing bankruptcy allows you to create a plan to restore financial stability. This may include debt restructuring, cost reduction and establishing a new financial management strategy. With the help of this plan, you have the opportunity to settle your debts under clearly defined conditions and restore your credit history within a certain period.

The possibility of full write-off of debts upon confirmation of insolvency

In the event that you have real insolvency and provide the court with adequate evidence of this phenomenon, you can count on the result of closing the case with a complete write-off of the debt, without additional financial and tax burdens, which allows you to legally stop the further fulfillment of the monetary obligation to creditors.

Unification of all existing debts

From the moment of the opening of bankruptcy proceedings, all creditors' claims will be considered within the framework of a single court process, and creditors will no longer have leverage over the debtor in order to settle the problem in a personal manner.

Disadvantages of filing bankruptcy

Loss of credit reputation for a certain period

If declared bankrupt, the result will be a ruined credit history. Bankruptcy will leave a mark on your credit report for a period of time, which can make it difficult to get a loan, apply for a mortgage, or make significant transactions to purchase or dispose of property.

The risk of losing part of the property and a time limit on the disposal of the property

In certain cases, you may lose some of your property after the bankruptcy process ends. This applies primarily to property that is not the sole residence of the debtor and does not perform an important function for carrying out his professional activities. The last type of property is prohibited from being included in the liquidation mass.
Also, during bankruptcy proceedings and implementation of a plan to restore solvency, a person has the obligation to refrain from concluding transactions for the acquisition or alienation of property, as well as restrictions on signing other types of contracts.

The need to make changes in professional activity

This consequence concerns enterprises that, in order to restore solvency, are obliged to repurpose their activities and take certain, sometimes painful, measures in order to stay afloat and restore financial stability.

Costs of bankruptcy proceedings

In order to initiate a bankruptcy case, the debtor is required to pay court costs in the form of payment of the arbitration administrator's fee in the amount of UAH 40,260. For some, this can be a burdensome fact.

Consulting with a professional can help you better understand your bankruptcy options, their advantages and disadvantages, and help you determine the best path forward. To do this, leave an application on the Prikhodko&Partners website and wait for a lawyer to contact you.