Is It Wise To Declare Bankruptcy To Get Out Of Debt?
- Author Liz Roberts
- Published December 8, 2009
- Word count 500
People who are facing huge debts are prone to making drastic decisions. But acting hastily or impulsively can only worsen the problem. If you are thinking about bankruptcy as the solution to your problem, you may want to sit awhile and reconsider your decision. Is it possible to get out of debt without filing for bankruptcy?
Get Out of Debt Without Filing for Bankruptcy
In the past years, it may have been easy to file for bankruptcy and start anew. However, since the bankruptcy law has been amended, the process of bankruptcy has become more complicated that it was years ago. Today, before you can seek bankruptcy, you should first complete counselling with a government accredited credit counselling agency at least 6 months before filing. Your credit counselling should know whether or not you are a candidate for bankruptcy. If not, your counsellor should help you find a more appropriate solution to your debt problem.
Another thing worth noting is that filing for bankruptcy does not guarantee that you will be completely exempted from paying your debts. After submitting your application, you will need to take up the Income Means Test to determine whether you can qualify for a Chapter 7 or Chapter 13 bankruptcy. Remember, a Chapter 7 exempts you from your debts overall while a Chapter 13 puts you under a repayment plan supervised by the bankruptcy court.
Financial experts do not recommend bankruptcy unless all possible solutions have been tried. Before thinking about bankruptcy, look for other ways to recover from your debts. Possible options include negotiating with your creditors, taking out a consolidation loan, seek credit counselling, consolidate credit card debts with a balance transfer card, and effective money-management or budgeting. Have you already tried taking these steps?
If you have really decided to declare bankruptcy, the best way to do so is to hire an attorney who specializes in bankruptcy cases. Your attorney should be able to advice you about the advantages and possible consequences of bankruptcy. Furthermore, filling out a bankruptcy application is not at all easy and you need to make sure that all information you provide are true and correct. With the help of a bankruptcy lawyer, you can be more confident that you’re submitting a valid application.
Aside from the complicated process, a record of bankruptcy in your credit report would make it more difficult for you to start anew. Bankruptcy would stay in your report for up to seven years and throughout that period lenders would deem you as a high risk borrower.
Although, there are some lenders who still offer loans or new credit to those who have been discharged from bankruptcy, these loans often come with expensive interest rates and fees. Rebuilding your credit would need time and can prove to be more difficult if you have a record of bankruptcy in your report. Yes, bankruptcy is not a helpless case but if you can resolve your debts without bankruptcy, you will be in a much better position to rebuild your credit.
Liz Roberts is a freelance writer and loan consultant. The website BadCreditResources.com offers resources that specialize in providing bad credit loans and credit cards for bad credit.
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