Question

What’s the difference between default and bankruptcy?

Answer 1

DEFAULT

When you cannot afford to pay credit cards or some other type of loan or account which is similar to the prior , the account may go into default. When this happens, the creditor can then take you to court and try to get a judgment against you. With this judgment, your creditor can then try to collect through wage garnishment, levying your bank accounts or through other methods. Depending on the size of the debt, the creditor may not go through the trouble of collecting the money, but they could report the default to the credit bureaus.

BANKRUPTCY

Instead of allowing your accounts to go into default, you may consider filing for bankruptcy. With bankruptcy, you can have all of your debts eliminated with the help of the bankruptcy court. Through this process, the bankruptcy court has the right to take your property and liquidate it to repay your creditors. After that takes place, they eliminate the rest of your debts and your creditors can no longer attempt to collect from you.

DIFFERENCES

The distinction between the two has to do with the inolvement of a legal authority. Default is when a debtor fails to pay a debt he or she is required to pay at a certain moment in time. Thus, a company, person, or country can default by failing to pay at a specified time. Default is a specific event, where an entity fails to meet this obligation.

Bankruptcy is a legal process, where creditors work with legal authorities to oversee the finances of an entity which is in default or insolvent. Bankrupcty is the process through which creditors collect the debts owed to them.