Why (and Why Not) Bankruptcy Should Be Only Your Last Resort
You have found yourself in an unenviable position where it is clear that you will not be able to pay your debts in the foreseeable future. Try your way, you just can’t seem to get off the debt treadmill! Due to his continuous financial difficulties, he is always stressed, unable to sleep and enjoy his daily life. You feel like a failure! Is there a way to get out of this black hole of debt?
In a situation like this, you may even begin to consider filing for bankruptcy. In fact, in some cases, bankruptcy could be a way to start from scratch. It could even become, much like a serious illness, for example, a turning point in your life. However, there is a good reason that bankruptcy is said to be the last resort for debt relief.
Going bankrupt is certainly not a “get out of jail free” card! The consequences of bankruptcy can be very serious. You probably already know that it will affect your credit. However, it can also affect your property, your job, and your pension. You may need to sell your assets, including your home.
Not everyone can be considered bankrupt. In recent times, legislation has made it difficult for people who have overspent to qualify for bankruptcy protections. Before filing for bankruptcy, you should get credit counseling. Before the process is complete, you will also need to complete a debtor education class.
Bankruptcy laws are specific to your state and your situation. Filing for bankruptcy is not something you need to tackle on your own – you will need to hire an attorney. This is not mandatory, but it is recommended. There are filing fees in addition to attorney’s fees.
Not all unsecured debt is dischargeable, so filing for bankruptcy may not immediately eliminate all of your debt. There are two types of bankruptcies, Chapter 7 and Chapter 13, and you may end up having a monthly payment to pay off all or part of your debt, rather than full liquidation.
Bankruptcy will stay on your credit card for up to ten years after the filing date. You will have to slowly rebuild your credit, and you may have trouble obtaining mortgages and other types of credit during that time. You may have a hard time getting some types of jobs. As we have seen, credit is not all that must be taken into account when thinking about making this financial move. It is interesting to note that, in some cases, your credit scores may increase after the bad credit situation is fixed with bankruptcy.