Top reasons on why to shun from a bankruptcy proceeding!

Most people who have a hefty amount of debt that they are struggling to pay off, at one time or another have considered the option of filing for bankruptcy. In this article I am going to give you three very solid reasons as to why you should circumvent bankruptcy at all costs, if possible. A lot of people in debt don’t understand the devastating negative impact a bankruptcy can have.

1. Filing for bankruptcy has an severe negative impact on your credit and becomes a lifetime public record!

A bankruptcy proceeding is one of the worst negative remarks that can be lodged on a credit report. Thus making any additional credit you attempt to get very hard, and if you do get credit it usually comes accompanied with a extremely elevated interest rate. Plus, it will reside on your credit history for up to 7-10 years. Even when it gets removed from your credit history it stays a public record for the remainder of your existence. So when you try for new loans at any point in the future, when they ask whether you have ever filed bankruptcy legally you must answer yes.

2. New Bankruptcy laws in 2005!

In 2005, Congress passed a law which makes anybody filing for a Chapter 7 bankruptcy proceeding, which will wipe the slate clear of all your debts much more difficult. Basically if you have an income and a home than most assuredly you will go through a review to resolve 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 try can not follow the very regimented guidelines set from the credit counseling companies to complete 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 court system will determine how much you will pay back each collector you list based on your monetary situation.

3. Court Controlled Income with Chapter 13!

Before the new law was approved in 2005 many people that would have been 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 show to them all of your finances. You must show all sources of income and assets. The court will review your expenses compared to your income and then determine how much money you will have to dish out each month. You do not have much of any say in this process. If you have liquid assets available they can make you sell them, within State law, to pay down your debt. There are timed reviews every year and if your financial situation changes you must report this to the court, this could increase the amount you pay back. If you have multiple family vehicles you could have to sell one to help pay off your debts. They for lack of better words tell you what you can do with your money. If you have the premium cable you will need to cut down to standard cable, if you eat high priced steaks every night you will need to cut back to cheeseburgers. This can be a extremely painful and embarrassing process.

These are all very bad things that people should be made conscious of before meeting with a bankruptcy attorney. A lot of lawyers will not disclose these unattractive aspects of claiming bankruptcy. Bankruptcy is available for a reason and for some individuals they have no other debt relief system available to them and must file bankruptcy, however the majority individuals go bankrupt unnecessarily. A very attractive alternative option to bankruptcy is debt settlement. With debt settlement in most cases you will save way more money than you could have with a Chapter 13, besides you will get out of debt faster as well, and not experience the multitude of negative consequences of filing for bankruptcy.

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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