Tuesday, March 25, 2008

Please do yourself a favor! Avoid Bankruptcy

It crosses many debtors minds when struggling in debt, at one time or another have contemplated the option of going through a bankruptcy proceeding. In this brief writing I am going to give you three very serious reasons why you should keep away from bankruptcy at all costs, if possible. Many people do not understand the deep negative blow a bankruptcy can have.
1. Filing for bankruptcy has an enormously negative effect on your credit rating and becomes a lifetime public record!

A bankruptcy proceeding is one of the worst derogatory remarks that you could have put on your credit report. Thus making any additional credit you try to get extremely hard, and if you do get credit it usually comes with a pretty elevated interest rate. Plus, it will remain on your credit history for between 7-10 years. Even when it gets removed from your credit history it stays a public record for the rest of your existence. So whenever you apply for new loans at any point in the future, if they ask whether you have ever gone through a bankruptcy proceeding by law you must answer yes.

2. Brand New Bankruptcy laws in 2005!

In 2005, Congress approved a law which forces anyone filing for a Chapter 7, which will wipe the table clear of all your debts much more difficult. Basically if you have an income producing job and assets than most assuredly you will go into a review to find out if you should do consumer credit counseling first for at the minimum 6 months. According to NFCC close to 80% of people who apply can't abide by the very regimented rules set from them to complete the program thus throwing them back into the bankruptcy proceeding. That's when Chapter 13 comes into the situation which is a form of personal bankruptcy in which the judge will decide how much you will pay back each collector you list based on your budget.

3. Court Controlled Income with Chapter 13!

Before the new law was approved in 2005 many people that would be able to claim Chapter 7, were now forced to go Chapter 13 in it's place. Chapter 13 requires that you review with the judge and make available all of your finances. You must show all sources of income and assets. The court will go over your expenses compared to your income and then figure out how much money you will have to dish out each month. The court decides this for you, leaving you with no say in this process. If you have liquid assets such as a paid off car they can force you to sell them, within State law, to pay down your debt. There are scheduled reviews each year and if your income increases you must tell this to the judge, this could bump up the amount you pay back. If you have two family cars you could have to sell one to help pay off your debts. They basically tell you what you can do with your income. If you have the higher costing cable you will be forced to cut back to basic cable, if you consume high priced steaks every day you will need to cut back to cheeseburgers. This can be a very hurtful and embarrassing process.

These are all extremely unattractive proceedings that debtors must be made aware of before dealing with a bankruptcy attorney. Many attorneys will not disclose these negative facts of 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 a lot individuals go into bankruptcy when it could have been avoided. A very attractive substitute option to bankruptcy is credit card debt settlement. With debt settlement in many cases you will save way more money than you could have with a Chapter 13, plus you will be out of debt much quicker, and not experience the multitude of negative consequences of a bankruptcy hearing.
Steve Bis is a credit card debt analyst with the US Consumer Advocate, which practices in debt relief.

29 comments:

jeffwend said...

It's really sad to see how many people are having to go into bankruptcy these days. I was not aware of all of the changes made to the bankruptcy laws. It's also unfortunate how people can be pushed into filing for bankruptcy after visiting with a bankruptcy attorney.

OnTheLine said...

I know economic conditions are difficult, and may get worse, but when file bankruptcy, we all suffer. I really appreciate your detailed information here. We can't make intelligent decisions without knowledge. Thanks!

Sam

Steve said...

I think this is a great post. filing for bankruptcy really is pretty awful to go through I am sure, so it would be a person's last resort. I understand that it initiates a court ordered "automatic stay", which stops your creditors from trying to collect what you owe them. It also prevents them from contacting you at all.

Nevertheless, I am sure that bankruptcy, regardless of whether chapter 7 or chapter 13 may have long lasting negative effects on your credit history - indeed some say for up to 10 years, and will remain a very negative chapter in anyones life.

These negative marks against your credit history must be worrying as they may make it difficult to apply for future credit, secure jobs that require a positive credit profile, rent an apartment, purchase a vehicle, etc.

Prasanna said...

Bankruptcy is a legally declared impairment of ability of an individual or organizations to pay their creditors. Creditors may file a bankruptcy petition against a debtor . In the majority of cases bankruptcy is initiated by the debtor.
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harry
Well, I think that if you're in serious debt, you should get in touch with a company which provides expert debt advice on various solutions to become debt free, and which doesn't take any money for it, like a not for profit organization.
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www.nfdmat.ning.com said...

Friends,

This site (www.nfdmat.ning.com) is a social network I have created to help others learn more about a non-profit agency called the National Foundation for Debt Management, and their pledge to pay off our debt when they receive referrals. We are so close to being out of debt, with NFDM's help, but things have taken a turn for the worse in the new economy, and your allowing me to post this could make a big difference for us. Let me know if you need more information. NFDM has a policy that every new client referral results in $100 being paid to a creditor on behalf of the one who made the referral. This means that is 17 other individuals who need help, mediation, education, improved credit scores and increased financial freedom sign up, then NFDM will completely pay off my remaining debt. Tbey will do the same for you, if you become a client, and provide referrals. That is my hope, as in Helping Other People Endure, that we can enable others to survive this economy by helping them get out of debt by using this method. When I became a client in 2003, my credit card balance was over $7000. NFDM has saved my thousands in interest.

Rick

Austin Schulman said...

www.debtreliefarena.com

Most American consumers are living too close to the edge. They are carrying too much credit card and mortgage debt and have too little in the way of savings. When the inevitable unexpected crisis comes along, they have little left to handle it and quickly slip into a critical financial state.

According to many bankruptcy experts, most people file for bankruptcy due to life-changing experiences, such as a job loss, divorce or serious illness. Uninsured medical expenses are supposedly the cause of about 20% of bankruptcy filings. But excessive debt also plays a very large role.

If you are drowning in debt with little realistic hope of paying off your bills, bankruptcy is your only real option. Although far from pleasant, bankruptcy can be easier to handle than the constant pressure put on a debtor by lenders and collection agencies. You can immediately stop all harassment and legal actions, wipe out a good deal of your debt and get a new start on life.

The anomalies of credit scoring also work against debtors struggling to pay off debt. Your score will be low because of excessive use of debt and missed payments. You're unlikely to get new credit and the interest rates on your credit cards might be raised to usurious levels. You are likely to have a better credit score and find it easier to get credit ? very expensive credit - after bankruptcy than before.

Also the stigma and embarrassment that used to accompany bankruptcy has largely disappeared. To many, it has become just another financial planning tool.

aldrin said...

.., this will depend upon the use of the person in the law firm... i think this will be great for some person and won't work for some...

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sellers79 said...

Great advice for people to follow. Their are ways to reduce your debt before you think of going through a Bankruptcy. credit card debt negotiations with a experienced company can make it a lot easier for you.

jaxon said...

It is very important to find out the right centre for bankruptcy. Debt settlement believed to help you discuss your debts and relief your burdens.

William said...

Debt settlement companies are increasing in large number, as more people are in need of solutions for their debt problems.

Credit Repair said...

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John said...

A professional debt-settlement company will help out of your debt for as small as half the amount you owe. But it is hard to find the right agency for your debt settlement programs.

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Cathy Mena said...

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Eddie said...

The economic conditions have worsened and many people are struggling. Bankrptcy isn't the only alternative to debt relief. I was a yound U.S Soldier who fell into bad debt and found a way to recover. You can work with Creditors and get marks pulled from your credit report if you negotiate. I really works and I now enjoy helping people learn. I have created a website with a lot of free information if anyone needs help. You can go to http://www.debt-escapes.com for more information.

getxposed said...

Great info on your blog for Debt Consolidation. If more people would visit blogs like yours and mine at http://debtconsolidation-blog.com then more people would be in a more comfortable financial situation. The info is out there and most are free, they just have to look!

DebtSettlementTexas said...

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Great information.Very interesting
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William said...

http://www.debt-education.com has some great tips about the Fair Credit Practices Act and how to resolve unsecured debt quickly and legally.

Jake said...

good advice, enjoyed the article!

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Anna Smith said...

Every one is seeking for debt relief options.. But we should avoid bankruptcy because of its serious consequences for many years.