Though it is seen as a last resort, Bankruptcy Allows a Consumer
A) Easily re-establish good credit.
B) temporarily stop paying debts.
C) Receive credit in an emergency.
D) Eliminate certain types of debt.
Answer:- The correct option is D. Eliminate certain types of debt.
Bankruptcy makes possible the cancellation of certain debts and a new beginning in finances for consumers. At least temporarily, filing for bankruptcy stops that person’s ability to pursue collection activities against the debtor.
Chapter 7 and chapter 13 are the most common for consumers among several varieties of bankruptcy filings.
Chapter 7 bankruptcy, which is often referred to as liquidation bankruptcy because most of the assets are sold off in order to repay creditors. Any remaining debts are often discharged, meaning that the creditors receive no payment at all. However, not all debts can be discharged including student loans, alimony and child support. Chapter 7 bankruptcy is reflected on a person’s credit report for an eleven-year period.
Chapter thirteen bankruptcy or wage earner’s plan means developing a repayment program to pay off some of the debt over three-five years. The plan of repayment allows the debtor to retain property such as a house or car, while she tries to catch up on outstanding payments. When the repayment is done, all unsecured debts including credit cards are discharged. Chapter 13 bankruptcy stays on a credit report for seven years.
On one hand, bankruptcy can be a source of liberation as well but on the other it leaves implications like poor credit scores which make gaining loans or credits in future difficult. It therefore is considered to be an option of the last resort when consumers have no other ways through which they can restore financial equilibrium. Elimination of debt via bankruptcy helps consumers restore their credit and financial standing in the future.
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