Bankruptcy is something that should not at all be taken lightly!
Most people who have a huge amount of debt that they are struggling to finish paying off, at one time or another have thought about the option of filing for bankruptcy. In this article I am going to give you some very solid reasons why you should circumvent bankruptcy at all costs, if you can. The majority of people don’t realize the serious negative impact a bankruptcy can have.
1. A bankruptcy proceeding has an enormously negative impact on your credit score and becomes a permanent public record!
Bankruptcy is one of the worst negative remarks that can be placed on a credit history. Thus making any additional credit you try to get very hard, and if you do receive credit it usually comes with a seriously inflated interest rate. Plus, it will remain on your credit history for between 7-10 years. Even once it is removed from your credit history it remains a public record for the duration of your life. So when you apply for new credit at any point in the future, if asked the question whether you have ever filed bankruptcy legally you must answer yes.
2. Brand New Bankruptcy reforms in 2005!
In 2005, our government passed a piece of legislation which makes anyone filing for a Chapter 7, which wipes the slate clear of all your debts much more difficult. Basically if you have an income and a home than most likely you will go through a review to determine if you should go through credit counseling first for at least 6 months. According to NFCC close to 80% of people who apply can’t abide by the very regimented guidelines set from them to finish the program thus throwing them back into the bankruptcy court. That’s when Chapter 13 comes into light which is a form of personal bankruptcy in which the judge will determine how much you will pay back each collector you list based on your financial situation.
3. Court Controlled Income with Chapter 13!
Before the new law was passed in 2005 many people that would be able to claim Chapter 7, were now forced to go Chapter 13 instead. Chapter 13 requires that you go over with the court and show to them all of your finances. You must show all streams of income and assets. The court will review your expenses compared to your income and then come to a determination on how much money you will have to put out each month. You have pretty much no say in this process. If you have liquid assets such as a paid off car they can force you to sell them, within State law, to pay down your debt. There are scheduled financial hearings every year and if your money making abilities change you must tell this to the court, this could increase the amount you pay back. If you have two family vehicles you might have to sell one to help pay off your debts. They basically tell you what you can do with your income. If you have the higher costing cable you will need to cut down to normal cable, if you consume steaks every day you will need to cut back to hamburgers. This could be a tremendously hurtful and embarrassing process.
These are all extremely negative things that people should be made aware of prior to speaking with a bankruptcy attorney. The majority of attorneys will not disclose these poor facts of bankruptcy. Bankruptcy is available for a reason and for some individuals they have no other method accessible to them and must file for a bankruptcy proceeding, however the majority individuals go into bankruptcy when it could have been avoided. A very nice alternative option to bankruptcy is credit card debt settlement. With debt settlement in many cases you will save tremendously more money than you could have with a Chapter 13, plus you will get out of debt faster as well, and not go through the many negative consequences of a bankruptcy proceeding.
Tags: Bankruptcy