Bankruptcy and the Economy

  • Bankruptcy and the Economy

    Legally, bankruptcy is a procedure in which either a person or a business can discharge its debt. This is possible in case the petitioner, the person or the business that files debt for bankruptcy, does not have any possible ways to pay it within a reasonable time, even with the help of bankruptcy attorney San Diego. With this, the debtor will be given the opportunity of a brand new start. However, for some person, falling into debt with just a minimal opportunity to pay it off will be very easy. This can be applicable especially in today’s scenario of easy credit. Yet, this is not a good idea for both the person and the society.

    Moreover, motivating people to work is one of the purposes of earnings and may be a factor affecting economic growth. Individuals need to pay majority of their money to the creditors and the result would lead to minimal incentive of working. Knowing this, lots of people would be possibly become slaves to those credit card companies and issuers of credits. Being able to fall on this would lead to total misery. Crime rates would increase in such a way that most individuals will have to look for ways to have money without reporting it.

    Bankruptcy offers the debtors a brand new beginning in order to alleviate the possible tremendous burden.

    How Bankruptcy Helps the Economy

    One major advantage of bankruptcy over the economy is assisting to moderate the economic state. Further, restricting the economy from having an overheat during booms and, at the same time, stimulating the economy during recession is also its advantage.

    Booms and recession on bankruptcy

    At the moment the people spend much of their money at a short span of time, booms usually occur. Meanwhile, recessions may be experienced at the moment the people do not spend their money in an enough manner. Having an easy credit, individuals may have to spend extra bucks, but for paying back the debt makes them to spend less. This action is actually the cause of the boom and the crash cycles directly.

    In case bankruptcy is present, creditors become prudent in the lending process. The moment the creditors extend their credits already, like to those borrowers under the subprime category, people on the poor side of the economy will have to spend money in a quick manner. This will lead the economy to heat up. Yet, the process of stimulation must need to stop due to the reason that the people can only have the ability to borrow more money. After this, the debt must need to be re-payed.

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