When a person or an organization is legally declared as ‘bankrupt’, it essentially means that the person or the business entity is officially unable to pay off its debt to its creditors or stakeholders. Some think that being bankrupt is perhaps the worst possible thing that can happen in the business environment, which is true in most cases. However, there is still a way out, and that is with the help of bankruptcy loans.
There are basically six kinds of bankruptcy, legally known as Chapter 7, Chapter 9, Chapter11, Chapter 12, Chapter 13 and Chapter 15 – of which personal bankruptcy under Chapter 7 and 13 are the most common types. Loans after bankruptcy are usually granted based on the type of bankruptcy that has been filed for.
There are two kinds of loans after bankruptcy – debt consolidation and post-bankruptcy loans. Post-bankruptcy loans are more popular than debt-consolidation loans, and are intended to help those who have undergone the entire bankruptcy procedure. Loans approved after bankruptcy filed under Chapter 7 need two full years before they can be qualified. In case of Chapter 13 bankruptcy, the debtor must pay back all its creditors in full before applying for a loan.
In order to qualify for loans, the party has to prove themselves as being creditworthy once again, by paying off due bills and maintaining a credit card. The credit card-issuing company can then certify the party as being financial responsible, thus providing it with the opportunity to apply for bankruptcy loans.
Post-bankruptcy loans can be given out for a number of purposes. There are mortgages after bankruptcy, car loans after bankruptcy, personal loans after bankruptcy, and a number of other kinds. To qualify for each type, one may require proof of creditworthiness and financial stability. In other words, the bankrupt individual, or organization, has to prove that he/she/ it can return the principal amount of the loan (plus the interest) at the end of the borrowing period.
Bankruptcy loans can be a great way to re-establish financial stability and economic security in an uncertain life after bankruptcy. However, it is also important to be confident enough that the loan, and all other debts will be cleared in due time. If someone cannot be sure whether he/she will be able to repay the loan, then it is perhaps not a good idea to apply for any loans. After all, it would be highly unfortunate if someone who has been declared to be bankrupt once becomes forced to go through the procedure again.