How Bankruptcy Filings And Recession Are Interlinked?

Personal bankruptcy starts with recession, due to less job opportunities and it also is a cause of recession. It leads to recession, it's a cycle that completes itself and in the end the consumer is again in loss. Though initially the consumer gets rid of hi debts by filing bankruptcy but at the end of the day he loses a lot.

The only positive thing about filing bankruptcy is that the debtor is relieved off his debts and doesn't have to pay anything to the creditor hence they choose personal bankruptcy. As per the laws the creditors are affected the most. Because of nonpayment of the dues from the debtor the creditors lose a great sum of money. This even lead to financial loses to the creditor and sometimes even the lender faces the threat of bankruptcy. The consumer enjoys as he/she doesn't have to pay their debts back once they have filed bankruptcy, but the creditor's faces challenges. They have to keep running their companies without funds as the funds are swallowed up because of bankruptcy filings. But at a certain point of time when the creditor can no longer run the business, he has to sell off his assets and file bankruptcy. Again the creditor becomes the debtor this time while the federal economy or we can say the government becomes the creditor. When a loan providing company liquefies itself, after showing itself bankrupt, it doesn't have to pay any taxes or any revenue due to the government. Hence the government too loses big money in form of lost taxes and unpaid revenue.

This setback to the economy due to personal bankruptcy filing by a consumer overtime leads to recession. Recession is a state basically when the funds are lost in market and almost every sector is under loses, and this is a similar situation. So recession might be a result of personal bankruptcy. Recession in turn leads to reduction in job opportunities, even existing jobs are withdrawn. "Golden handshake" is a very common practice during recession, in this company's expels a bunch of their employees because of less finances to pay them. Thereby affecting the common men, hence what started with common men again affects the common men.

Clearly, we get a link between Personal Bankruptcy and recession. Hence the consumers must go for other ways to deal with their dues. Debt settlement or arbitration can be a very positive way of getting rid of your debts. By this way the creditors are also not affected much, they aren't paid fully, but at least they receive some payment.