Avoid Bankruptcy at all cost!
Most people who have a rather large amount of debt that they are failing to finish paying off, at one time or another have thought about the option of filing for bankruptcy. In this writing I am going to give you three very serious reasons as to why you should circumvent bankruptcy at all costs, if possible. The majority of people in debt don’t realize the very negative blow a bankruptcy can have.
1. Filing for bankruptcy has an severe negative effect on your credit and becomes a permanent public record!
A bankruptcy proceeding is one of the worst derogatory remarks that can be logged on a credit history. Thus making any more credit you try to get extremely hard, and if you do get credit it usually comes with a extremely high interest rate. Plus, it will reside on your credit report for up to 7-10 years. Even when it gets removed from your credit report it remains a public record for the rest of your existence. So when you try for new credit at any point in the future, if asked the question whether you have ever filed bankruptcy to avoid breaking the law you must answer yes.
2. Brand New Bankruptcy reforms in 2005!
In 2005, Congress approved a piece of legislation which forces anybody filing for a Chapter 7 bankruptcy proceeding, which wipes the slate clean of all your debts much harder. Basically if you have an income and a home than most likely you will go through a review to resolve if you should do credit counseling first for at the minimum 6 months. According to NFCC close to 80% of people in debt who try can’t abide by the very regimented rules set from them to complete the program thus tossing them back into the bankruptcy proceeding. That’s when Chapter 13 comes into the situation which is a method of personal bankruptcy in which the court will decide how much you will pay back each creditor you list based on your monetary situation.
3. The court will control your income with a Chapter 13 Bankruptcy!
Before the new law was put into place in 2005 many people that would be able to file for Chapter 7, were now forced to go Chapter 13 instead. Chapter 13 requires that you go over with the court and disclose all of your financial information. You must show all streams of income and assets. The court will look at your expenses compared to your income and then come to a determination on how much money you will have to deal out each month. You do not have much of any say in this process. If you have liquid assets available they can force you to sell them, within State law, to pay down your debt. There are timed reviews every year and if your money making abilities change you must report this to the court, this could bump up the amount you pay back. If you have multiple family cars you might have to sell one to pay down the debt. They for lack of better words tell you what you can do with your income. If you have the higher costing cable you will need to cut back to basic cable, if you eat steaks every night you will need to cut back to hamburgers. This can be a very hurtful and embarrassing proceeding.
These are all seriously negative things that debtors must be made aware of before dealing with a bankruptcy lawyer. The majority of lawyers will play off these poor facts of bankruptcy. Bankruptcy is available for a purpose and for some debtors they have no other method accessible to them and must file bankruptcy, however a lot debtors go into bankruptcy unnecessarily. A great alternative option to bankruptcy is debt settlement. With debt settlement in most cases you will save more money than you could have through a Chapter 13, plus you will get out of debt faster as well, and not undergo the many negative consequences of a bankruptcy proceeding.
Steve Bis is a credit card debt analyst with the US Consumer Advocate, which practices in credit card debt reduction.
- Steve Bis
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