Most debtors who have a large amount of debt that they are struggling to finish paying off, at one time or another have considered the option of going bankrupt. In this brief article I am going to give you some very serious reasons why you should circumvent bankruptcy at all costs, if possible. Many people in debt don’t realize the serious negative blow a bankruptcy can have.
1. Filing for bankruptcy has an severe negative impact on your credit and becomes a permanent public record!
Bankruptcy is one of the nastiest derogatory remarks that can be placed on a credit history. Thus making any more credit you try to get very difficult, and if you do obtain credit it usually comes accompanied with a seriously elevated interest rate. Plus, it will remain on your credit report for between 7-10 years. Even once it is removed from your credit report it stays a public record for the remainder of your existence. So whenever you apply for new credit at any point in the future, if they ask whether you have ever filed bankruptcy to avoid breaking the law you must answer yes.
2. New Bankruptcy reforms in 2005!
In 2005, Congress approved a piece of legislation which forces anybody filing for a Chapter 7, which will wipe the plate clear of all your debts much more difficult. Basically if you have an money and assets than most likely you will go through a review to determine if you should go through consumer credit counseling first for at the minimum 6 months. According to NFCC close to 80% of people in debt who apply can not abide by the very regimented guidelines set from the credit counseling companies to finish the program thus tossing them back into the bankruptcy court. That’s when Chapter 13 comes into the situation 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. The judge will control your income with a Chapter 13 Proceeding!
Prior to the new law being approved in 2005 many debtors that would have been able to file for Chapter 7, were now forced to go Chapter 13 instead. Chapter 13 requires that you review with the judge and show to them all of your finances. You must show all forms of income and assets. The court will look at your monthly expenses compared to your income and then determine how much money you will have to dish out each month. You have pretty much no say in this process. If you have liquid assets such as a house they can make you sell them off, within State law, to pay down your debt. There are scheduled hearings each year and if your money making abilities change you must tell this to the judge, this could increase the amount you pay back. If you have multiple family cars you might have to sell one to help pay off your debts. They basically tell you what you can do with your money. If you have the higher costing cable you will need to cut back to normal cable, if you eat steaks every day you will need to cut back to burgers. This can be a extremely hurtful and embarrassing proceeding.
These are all seriously bad things that debtors must be made aware of before dealing with a bankruptcy lawyer. Many attorneys will not disclose these bad aspects of bankruptcy. Bankruptcy is available for a purpose and for some individuals they have no other method accessible to them and must file for a bankruptcy proceeding, however many individuals go into bankruptcy unnecessarily. A great substitute option to bankruptcy is credit card debt settlement. With debt settlement in the majority of cases you will save tremendously more money than you would have with a Chapter 13, besides you will get out of debt much quicker, and not go through 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
This entry was posted on Monday, November 30th, 2009 at 1:11 am and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.
