Effects of Bankruptcy

Bankruptcy greatly affects the economy in positive and negative ways. It would also depend on which type of bankruptcy the consumer has filed. The two types of bankruptcy discussed are chapter 7 and chapter 13 bankruptcies. Chapter 7 basically forgives all debt and the consumer who has filed for bankruptcy starts their credit score to the beginning. Chapter 13 reorganizes and renegotiates the debt but the debt is not released. The chapter 7 bankruptcy benefits the consumer by resetting the credit score and the consumer will start spending and saving as the economy starts to flow upward. Although the debt is erased, the finance companies and marketers are at risk because the debt was not repaid, which makes the business fail and the economy to slow down. The chapter 13 type is more for the marketer; it benefits the merchandiser by collecting debt from its consumers after a certain amount of years. Most of the merchandisers collect the debt from the finance companies and maintain the business. The consumer may have filed for the chapter 13 bankruptcy, but the debt still must be paid. So the consumer has to repay the debt in order to start spending and saving. Bankruptcy affects both the consumer and marketer, but the consumer cannot assume they are chapter 7 bankrupt. Today most consumers are on chapter 13 bankruptcies because of too much spending beyond the consumer's monetary needs. The balances of these types of bankruptcies have played a significant role in today's economy, more like a cat and mouse chase. As long as the consumer is spending and the marketers are still in business, the economy will still fluctuate.