Facing Bankruptcy - What Next?*

*This is a collaborative post*

 

With leading financial experts this week forecasting the greatest Economic recession since the Great Crash of 1929/30. There is much doom and gloom regarding the global economy. The knock effects to the economy of this pandemic are on a scale likened only to times of world war. The World Bank are putting together a relief package of $14 billion to help some of the areas which are now really suffering such as sub-Saharan Africa. 

It is a stark inevitability that many businesses will not survive the coronovirus. 

With so much tragedy and despair in the world at the moment as death tolls and confirmed case figures continue to rise with great speed, business will be the last concern for many of you. Unfortunately for those who are self-employed or who are employed by small businesses, the future suddenly looks very uncertain. 

Life After Bankruptcy

One of the biggest misconceptions is that financial bankruptcy spells absolute and total financial ruin. This frankly is not the case. The government signs off on thousands of bankruptcy files annually, which would be unwise if the aforementioned fable were true. Although Bankruptcy will certainly pose great difficulties and it is the least desirable outcome of any business or financial venture. It does not mean that you are down and out. 

Famously, Mark Twain, Walt Disney and even the current US President Donald Trump have all filed for bankruptcy at some point. Trump most recently of course as he was declared bankrupt in the 1980’s and ultimately came back to make billions of dollars. 

Using your post bankruptcy income and credit wisely is the key towards re-establishing a good credit rating and to returning to some level of financial independence. It can be difficult to secure a loan for major purchases (such as for a car or home) for 7 to 10 years post bankruptcy. However, if you do secure a loan from a financial company and if you do make your repayments then you can prove over time that you can manage your money wisely. 

Self Employed & Facing Financial Difficulty/Bankruptcy

Firstly for anyone considering filing for bankruptcy in the United States, if you are not familiar with Chapters 7 and 13 respectively with regards to filing for bankruptcy, then please take some time to read up on them. There is a link here which will outline each option and what each Chapter will entail. Chapter 11 is relevant to large scale businesses. Chapters 7 and 13 are the two most common types of bankruptcy in the US. 

So with the struggle to secure any lines of credit post-bankruptcy, if utilised sensibly and with good care then self employed loans could be a serious opportunity for some of you to try and re-establish your financial footing. 

Self employed loans are loans which are given to sole traders who have come upon stony ground financially and even those who have filed for bankruptcy. You should be aware that  these types of loans come with very high interest rates. Securing a loan after bankruptcy from a traditional lender becomes almost impossible. But there are lenders who are willing to lend at an inflated rate of interest due to the greater risk that they take on as lenders. 

As with any loan option, you should never enter into any kind of financial agreement without first thoroughly researching your options. Do not borrow so much you cannot repay or the late fees and interest could run exponentially high. But for those who might find themselves in dire straits, it is a feasible option to be considered. 

*Contributed by Michael David. *Header photo source Pexels.

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