Legal Implications A Catastrophic Outcome

In the present complex world of Finance and Industry, bankruptcy is one of the most commonplace terms that are closely associated with insolvent companies. The term "Bankruptcy" is essentially used for large corporate houses, small business ventures or even individuals having outstanding loans accruing over a period of time including an equally very high interest that are legitimately to be paid to creditors over a stipulated period. Bankruptcy can easily be depicted as a legal proceeding in a court of law where the assets of the debtor are liquidated in order to provide a relief to the debtor from any further liability to their creditors and to arrange payment of debts from the limited resources of the debtor.
Causes of Bankruptcy
There are a large number of companies picking up huge loans at higher rates of interest from companies offering loans, creditors or financial institutions with a view to expand their business potential. In the present day scenario, it is a normal practice that it is not only the companies that take up loans, rather individuals also approach financial institutions for personal loans. The inability of these large companies to repay their loans results in the company becoming bankruptcy or insolvent. One of the major factors that often result in bankruptcy is the grim economic situation of the country and the impending recession.
Bankruptcy Laws
The repercussions of these laws on the company or an individual are extremely strenuous. Once the creditors become aware about the insolvency of the company, they file a legal suit against the debtor claiming repayment of their loans by the debtor. One of the first steps of the laws of bankruptcy is that the assets of the debtor are liquidated to pay off the creditors.
Professional Assistance
In a normal situation, a company files for bankruptcy prior to declaring themselves bankrupt due to insurmountable loan amounts that have accrued along with the interest. It is always in the interest of the debtor that he consults a legal practitioner and seeks his assistance on the prevalent laws of bankruptcy or obtains appropriate credit counseling from an organization approved by the government at least six months prior to applying for filing for a bankruptcy protection in a designated court of law.
There is no dearth of solicitors and lawyers around the country who offer their professional services to help a bankrupt company to tide over their financial crisis. These professional attorneys assist their clients in working out their loans and helping them with the settlement of their outstanding debts in an orderly manner, thereby securing their clients' financial future and consolidating their financial resources. However, it would be prudent for people who are plagued with debts to check on the credentials and reliability of the attorneys filing their petition before entrusting them with the assignment since this work involves a lot of secrecy and confidential information being handed over the attorneys.

There is hardly any doubt that bankruptcy spells disaster on several counts. While large and small business enterprises often opt going in for a loan from either a bank or financial institutions or from private individuals at exorbitant interest rates with an objective of business expansion, yet there are always pitfalls when it comes to repaying the debt along with the high rate of interest. It is at this stage that a majority of these large companies feel incapable of bearing the brunt of repayment within the prescribed time frame.
Recession
In fact, the prevalent market conditions play a major role in the drop of the economy of an industry. More often this situation arises when there is a slump in the market and the prices of products drop drastically creating chaotic circumstances which lead to recession. The recession forces both corporate houses and individuals towards the brink of bankruptcy or insolvency. It would be pertinent to mention that normally financial institutions before offering massive loans to corporate houses generally audit the accounts and assess the financial position of a company, yet when unprecedented conditions prevail in the market, there is no option left for the debtor to file a petition in a court of law for protection against bankruptcy.
A Legal Process
Bankruptcy is a legal procedure, where the assets of a debtor are liquidated and sold off to pay off the dues of the creditors thereby relieving the debtor from any further liability since a major portion of the debt is cancelled or invalidated. The second step involves reorganization of the debt. The court appointed trustee works out the debt according to which debtor is required to repay his debt. The monthly payment of the debt amount is required to be paid to the creditor over a period of time which cannot be extended beyond five years. It would advisable for the debtor to seek professional assistance from a reputed lawyer. It is also necessary that the debtor is fully aware of the implications of the prevalent bankruptcy laws.
Bankruptcy - Advantages & Disadvantages
There are certain advantages and disadvantages that are associated with the filing of a bankruptcy petition. One of the major advantages is that the debtors are able to start afresh as regards as the finances of a company are concerned. In a way, the debtor may be able to retain some of the assets which are decided by the prevalent laws of a particular state. While an unsecured debt may be waived off, the creditor is entitled to secured debts from the debtor over whom he has a legal right in case repayment amounts are missed out. Bankruptcy leaves an indelible scar on the debtors' credibility for at least seven to ten years that may seriously affect future finances of a company. Further, a bankruptcy can pose problems on obtaining future loans for some time.