Bankruptcy Shouldn’t Be Your Only Option
When you are falling behind on your payments you may feel overwhelmed, frustrated, and in some cases even scared because you have no idea how you are going to pay back your creditors. You may find yourself considering bankruptcy. But, believe it or not, bankruptcy can be a smart financial decision in certain situations. Bankruptcy’s designed to give people a fresh start when they need one. And if you file for bankruptcy, there is no shame in doing so, you’re taking a big step towards getting your finances under control.
But keep in mind that filing for Bankruptcy is a serious decision with serious consequences, your credit rating takes a big drop and your spending habits may need to change. Even though bankruptcy will fall off your credit report after 7-10 years, it is always better to pay off your debts rather than file for bankruptcy. A bankruptcy filing could also have an impact on your emotional life or your personal life. People who have filed for bankruptcy report feelings of regret and failure years after filing.
What is Bankruptcy?
Bankruptcy is a legal proceeding involving a person or business that is unable to repay their outstanding debts. The bankruptcy process begins with a petition filed by the debtor, which is most common, or on behalf of creditors, which is less common. All of the debtor’s assets are measured and evaluated, and the assets may be used to repay a portion of outstanding debt.
Things to keep in mind:
- Bankruptcy is a legal proceeding carried out to allow individuals or businesses freedom from their debts, while simultaneously providing creditors an opportunity for repayment.
- Bankruptcy is handled in federal courts, and rules are outlined in the U.S. Bankruptcy Code.
- There are various types of bankruptcy, commonly referred to by their chapter within the U.S. Bankruptcy Code.
- Bankruptcy can allow you a fresh start, but it will stay on your credit reports for a number of years and make it difficult to borrow in the future.
Negotiating with Creditors
Creditors would rather settle a debt with you than have it discharged in bankruptcy. It may be easier to negotiate a settlement if you’re already a few months late on the payment. Bankruptcy is a last resort, but that does not mean there is no other option and it shouldn’t be your only option. Finding the perfect financial consultant for your case is a step in the right direction. A financial consulting company that can help you resolve your financial obligations is what you need and this is where we come in. Other companies that deal with debt may tell you that filing for bankruptcy is your only option, and then you are forced to pay them large amounts of money to handle your case.
Create a Budget to Pay Down Debt
Often, a debtor’s problems can be resolved by learning better money management strategies. Using credit counseling and budgeting, you may be able to reduce expenses, find new income sources, and sell assets to pay down your debt. This will help you learn new strategies that will reduce your debt now and help you manage your finances in years to come. Seeking a reputable and experienced debt relief company is a good starting point.
Pros and Cons of Bankruptcy
Bankruptcy carries with it, considerable consequences that you need to keep in mind and this should not be taken lightly, as Bankruptcy can impact your financial future for years to come. Here are some advantages and disadvantages of Bankruptcy:
Advantages of Bankruptcy
- No longer legally required to repay debt
- The collection calls and letters stop
- No stress over possibly getting sued
- You’re not liable to pay taxes on forgiven debts
Disadvantages of Bankruptcy
- Bankruptcy appears on your credit report for 7 years
- May have to repay to 50% of debt if a Chapter 7 isn’t granted
- Negative accounts will show “Included in Bankruptcy”
- Negative accounts still appear on your report and hurt your score
- Credit score will drop significantly
- Could cost thousands of dollars to hire a bankruptcy attorney
- Will not be able to obtain new credit for years after a bankruptcy
Should I file for Bankruptcy?
This depends on your financial situation and what you are willing to settle for, but Bankruptcy should only be taken as a last resort if you absolutely cannot repay back your debts. On the other hand, if you are facing unpaid medical bills or other collection accounts, then bankruptcy is not always the best answer.
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