New here? Start with these articles to learn about US bankruptcy, debtor bankruptcy
alternatives like debt consolidation, debt settlement, debt negotiation, and debt management.
You'll also learn the causes of debts that can lead you to file bankruptcy and how to recover
from it.The Hidden Costs Of Filing Bankruptcy
Bankruptcy is a means to get out of debt. Some feel that it is a quick escape from mounding debt, and they make it their number one option. However, bankruptcy is no little thing and should be weighed carefully.
Understand that filing bankruptcy means you will pay a very small percentage or nothing at all toward the debts you owe. Your creditors clearly do not want that and they do have a say. That means they and the courts will require detailed explanation for why you can not pay and this can get personal. Therefore, while the act of filing for bankruptcy is relatively painless, the entire process is far from that.
If you are awarded bankruptcy, there will be some repercussions that will affect you for years to come, and these should be carefully considered.
You will no longer be eligible for any decent credit. That means that if you are able to receive a significant loan, for instance a home loan, you will be subject to extremely high interest rates which can lead you right back into financial ruin. Any credit cards that you were unable to pay will be lost, and other companies may decide that you are no longer a good risk and terminate your credit with them.
Bankruptcy does not always mean debt free. Some debts are exempt, such as back taxes within three years and student loans.
That situation will persist for 10 years, during which time you will need to maintain a near perfect credit record in order to work your way back to a useful level of trust. Potential creditors will regard any bankruptcy as the most negative criterion on any credit report - even beyond a low FICO score.
In addition to sacrificing any chance of good credit for years to come, you may also be required to sacrifice some of your belongings. Though the courts usually allow you to maintain possession of your primary residence and your car, any other real estate or personal property of great value may be confiscated.
As with any legal proceedings, bankruptcy costs money. You will be required to pay a lawyer and any court costs incurred. When you are already in financial trouble, this can be a very unwelcome expense.
There are some positives to bankruptcy as well. The debt collectors will stop calling once they receive word that you have filed bankruptcy. Also, you are protected from wage garnishment and from loosing your primary residence in foreclosure. If these things are eminent and you have run out of options, bankruptcy may give you a fresh start so that you can begin to rebuild your credit.
About the Author:
Looking for help with reducing credit card debt? Learn some simple ways to start getting your debt paid off today on the Debtopedia website. Visit http://www.debtopedia.com to get your free copy of my special report “Secrets Of Credit Card Debt” today.
William Blake | Debt Relief |
Tags: credit card debt, Debt Relief
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