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You really shouldn't
consider filing for bankruptcy just because you have high
consumer debt.
There are several things to consider before
deciding if you should file for bankruptcy. If your debt
to income exceeds 40-50% filing bankruptcy may be a viable
option. Here are some bits of info on bankruptcies to take
into consideration.
**Remember filing bankruptcy can stay on your credit report
for 7 years.
Things a bankruptcy can eliminate:
- Credit Card Debt
- Medical Bills
- Auto Loans
- Utilities
Things a bankruptcy cannot eliminate:
- Child support
- Alimony
- Student Loans
- Taxes
Types of bankruptcy are:
Chapter 7: Allows your to cancel certain
debts that you can legally cancel.
Chapter 13: Usually sets up a payment schedule
for debt repayment over a several year plan. Does not eliminate
debts.
**Remember either bankruptcy will stay on
your credit report for 7 years.
Getting credit after a bankruptcy is going
to be difficult, but not impossible. Probably your best
option will be saving some money up and getting a secured
credit card. These types of credit cards require you maintain
a balance in a bank account that is equal to your credit
card limit.
You have to be careful when considering filing bankrupcy.
Basically you have two options:
1. Attorneys: Now this sometimes could be considered a conflict
of interest. How does a legal counsel make their money?
Fees!!!! so with all things being equal which way do you
think they will want to send you.
2. Credit Counselors: On the other side of
the coin are debt consolidation counselors. This is probably
a better option for people who truely want to pay their
debts. Debt Consolidation Companies also get their fees,
but being able to negotiate a lower interest on your debts
will probably offset your fees. Although this type of action
can also have an effect on your credit report it should
not be as critical as a bankruptcy entry.
As a credit consumer you need to be perfectly
clear on one issue; BANKRUPTCY IS BAD FOR YOUR CREDIT!
Contrary to popular belief bankruptcy does
not "clean up" your credit. Bankruptcy will remain
on your credit report for 7 to 10 years. Many people believe
that filing bankruptcy and obtaining a discharge of their
debts will lead to a complete clean start for their credit
and will usher in new credit opportunities. Don't believe
it! Rebuilding your credit after bankruptcy is a long process,
even though it can be done. Don't delude yourself into believing
that the interest rate a credit card company will charge
after bankruptcy will be the same as for a consumer without
a bankruptcy.
There are other pitfalls to be aware
of, such as with the I.R.S and student loans, and even some
retail companies that will not discharge your debts. The
effects of bankruptcy will be felt long after the process
is over. This is not to say that bankruptcy is always the
wrong choice. In cases of elderly debtors or when property
is at risk, bankruptcy may be a viable alternative, however
having one or two bad credit years and bad credit references
on your credit report is far easier to explain to lenders
than a bankruptcy filing. Think long and hard before making
a decision on something that could effect you for many years
like bankruptcy.
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