Reasons to avoid bankruptcy
Excessive debt is an issue that many people are facing in this economic climate. For those with too much debt, there are a few alternatives that offer potential solutions. Debt settlement or debt consolidation are methods to relieve the burden and eventually become debt-free.
another popular way to escape the hassles of debt is bankruptcy. While bankruptcy can be a viable solution for some people, it is not something that should be jumped into without carefully researching the options and alternatives.
There are viable reasons to avoid bankruptcy and seek other solutions instead. Bankruptcy is not an Easy Solution Going through bankruptcy could be compared to going through a divorce. both divorce and bankruptcy have their place in society, but all other options should be exhausted first before proceeding with these last resorts. both options can also have legal ramifications for many years to come. Bankruptcy is one of the most upsetting events in life. It is usually listed near the top along with divorce, loss of a loved one, and severe illness. It can cause irreparable harm to someone’s credit score and life. Types of Bankruptcy In the United States, there are two principle types of bankruptcy for individuals. Chapter Seven is merely a liquidation process during which the debtor’s assets are sold by a trustee and the proceeds of this sale are distributed to the various creditors. When filing this type of bankruptcy an individual’s debt and property are placed in the hands of the court. Individuals are not allowed to sell any of their property or pay off any debts without first obtaining approval from the court. this type of bankruptcy is often referred to as liquidation bankruptcy. Chapter Seven will remain on an individual’s credit report for ten years. Another type available to individuals is Chapter Thirteen. the goal of this type of bankruptcy is to renegotiate the total amount of debt by devising a plan with more advantageous terms of repayment for the consumer. With this type of bankruptcy the total amount of debt will be reduced significantly and can usually be paid off in no more than three to five years. Under Chapter Thirteen bankruptcy, the payment plan is designed and approved by the Court; it does not have to be approved by the creditors.
Chapter Thirteen stays on a person’s credit report for seven years. Why Avoid Bankruptcy If it is possible to avoid bankruptcy, there are many reason to do so. For both Chapter Seven and Chapter Thirteen, an individual’s credit report will take a bad hit. they both can bring down a credit score by approximately 200-250 points. As previously mentioned, they remain on someone’s credit report for seven to ten years and can make it quite difficult to qualify for new loans and credit for several years. Buying or even renting a home can become a hassle. Your insurance rates may even increase as many insurance carriers now look at credit scores when underwriting a policy. It is also possible that property may be lost as certain assets will be sold to repay the debts under Chapter Seven bankruptcy. A person can potentially lose a home or a car under this plan. if the property is not sold, an individual is still responsible to pay any existing mortgages or loans. though retirement accounts are often protected, this is not always the case. Depending on state law, 401Ks, IRAs, social security, government pensions and other retirement accounts may be used to repay debt. not all debt can be eliminated under bankruptcy. Back taxes, child support, student loans, alimony, and certain others cannot be taken care of with bankruptcy. There is no doubt that bankruptcy can have severe adverse affects on one’s financial situation. Carefully Decide if Bankruptcy is the Right Option The financial crisis is real. People are out of work, companies are closing their doors, and many individuals are buried under mountains of debt. It is not a pretty picture. One of the alternatives available for those struggling with excessive debt is to file for bankruptcy. does bankruptcy offer a viable solution for people who see no other way out from under their excessive debt? Or is it something that seems like a golden ticket but may have too many negative long term consequences? Before seriously considering bankruptcy, it is vital for anyone in this situation to carefully research every option. Bankruptcy is not a quick fix; it has long term consequences that will severely affect a person’s quality of life for several years. Reasons to Avoid Bankruptcy
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