Bankruptcy: How, Why, What
Are you at a point where you don’t know what to do about your debt anymore? Are you thinking about filling for bankruptcy? What exactly do you know about the process of bankruptcy and how it works? Are you even sure this will help you more then it will hurt you? These are all questions you should ask yourself before you do something as drastic as bankruptcy.
For starters, bankruptcy is and always has been the last option for consumers looking to resolve their outstanding debt situation. You should always look for an alternative to bankruptcy when possible. In the past, it was relatively easy to file for bankruptcy but it still ruined ones credit history. Since the changes in bankruptcy laws a few years ago, the process of filing for bankruptcy has become more complicated and also more expensive. Consumers like you have to enroll in pre filing credit counseling, pass a means test to prove they are incapable of paying back their debts, as well as enrolling in a mandatory credit counseling session after the bankruptcy process is complete.
If you do decide for this option, the first question you have to ask yourself, “What type of bankruptcy do I want to file for?” There are two types of bankruptcy filings, chapters 7 and 13. In a chapter 7 filing, all the assets are liquidated (sold) except those exempt by state or federal law and the proceeds are used to pay off the outstanding creditors. In a chapter 13 filing, you are allowed to keep necessary assets and you enroll in a structured repayment plan usually over a 3 to 5 year period. Contrary to popular belief, in this type of filing you can typically expect to pay back 30% to 100% of your outstanding debt.
If all of this hasn’t encouraged you to reconsider yet, the cost of filling for bankruptcy is far reaching both financially and socially. Financially, the cost of filing has been going up for years. The initial filing fees total about $300, which seems relatively modest. However, you need to hire a lawyer to do this, and these costs can range upwards of $1000. Besides a short term hit to your pocketbook, a bankruptcy filling is a public record that is reported for seven to ten years after the filing to the credit bureaus. Due to this, your future ability to obtain new lines of credit, jobs or even insurance is greatly hampered by a bankruptcy filling. A quick Google search of your name will show the world that you filed for bankruptcy. On top of all this, a bankruptcy filing is embarrassing to you and your family. It will make you feel inadequate and incapable of meeting your obligations. Everyone wants to have the ability to pay for their bills, so consider that when you are deciding to go the route of bankruptcy.
Whichever filing you end up choosing if you do go the bankruptcy route, the hope is that you will have learned from past mistakes and will do your best not to file again in the future by living within your means. Hopefully you will have learned to effectively manage your debt better in the future. Bankruptcy is the one option you should try and avoid at all costs. The black mark of a bankruptcy filing on your credit report can ruin areas of your life that you never thought would be affected, so tread carefully when deciding that bankruptcy is your only option.
