Answer:
•Filing for bankruptcy can eliminate debt.
•A major consequence of bankruptcy is that it can harm an individual's chances of receiving additional credit.
Explanation:
Bankruptcy can be defined in three ways.
1. Bankruptcy involves restructuring debts owed by a debtor inorder to be able to pay them. In other words, debtors would file for bankruptcy if they want more time to have their debts restructured(having a payment plan). This gives them another opportunity to pay up their debts.
2. Bankruptcy is when a company sell off it's assets or liquidate them inorder to pay up the debts owed to creditors.
3. Bankruptcy is when an individual who earns wages or has steady source of income is allowed to have a payment plan in order to pay part of his or her debt.
In the above defined bankruptcy options, the chances of getting additional credit after paying up the initial is low. The reason is that these debts would reflect in the credit report of would be borrower in the future hence pose a red flag to organizations that would grant the credit.
It is important for individuals or companies to manage their credit efficiently. Though filing for bankruptcy can eliminate debt, the major future consequence of it is that it can harm an individual's chances of receiving additional credit.
