By Anthony Ngatia
When faced with overwhelming debts obligations, some people turn to courts of law to file for bankruptcy.
They compel the courts to declare them bankrupt and insolvent, meaning that they no longer have capacity to clear their debts.
They also set legal protection from creditors not to pursue them.
Companies’ can also file for bankruptcy if they find that their debt has grown so high over time such that they may not manage to clear it. They go to courts of law so as to be protected from the harassment from creditors.
So, is this a smart move or a case of digging oneself deeper into the hole?
Personal finance experts say the move is only temporarily. It doesn’t mean one will not have to pay all their debts after all.
According to John Mungai, a personal finance expert, “being declared bankrupt only allows you to reorganise yourself on how you will clear the debts you owe without necessarily having to be harangued around by your creditors.”
A number of unforeseen causes can lead one unable to pay their debts such as sudden loss of income, sudden business loss thus rendering them unable to clear their debts including those of their suppliers.
The burden of proof
Since such a turn can have disastrous consequences on one’s finances as creditors start charging ridiculous interests on whatever you owe them, personal finance experts say that where the case is dire and really deserving, exploring this option could stop further pile up of debts in forms of interests.
The best starting point is to see a lawyer who is well versed with financial aspects.
