Bankruptcy might seem like an easy way out of big money problems. But it is always best to avoid bankruptcy at all costs and only use it as a last resort.
If you go bankrupt, this will show up on your credit report for ten years. This will make it hard for you to borrow money or get credit. Some lenders may give you a small amount of credit if you've been bankrupt, but only after you explain your situation in detail and pay a higher interest rate and more credit fees. Another reason to avoid bankruptcy is that some kinds of bankruptcy require that assets be taken back. Once the bank finds something you have that you don't need to live, that item could be taken to pay for your debts or bankruptcy costs.
If you file for bankruptcy, your money problems won't go away, and the court will look into every part of your life. You will have to give the court information about your savings, investments, and assets. Even though bankruptcy may seem like a way to get out of paying debts, you may still have to pay for things like alimony, court costs, or child support.
Keeping these things in mind, it is better to avoid bankruptcy at all costs. One of the best ways to stay out of bankruptcy is to consolidate your debts. These companies can help you by looking at all your loans and coming up with a plan to pay off all of them. The company takes care of paying all your creditors; you only have to send them one payment each month. They can also get you a lower interest rate and more time to pay back the loans, which will save you some money.
With credit cards and credit accounts at department stores being so easy to get, it's now pretty simple to get into debt. When money is tight, it is better to pay bills with cash than to use credit. So you should close the credit card account! If you get into debt, you shouldn't try to hide from the debt companies. Instead, you should talk to them because they may be able to help you negotiate and get out of debt. When you're in debt, it's always best to make a budget and figure out what your debt to income ratio is. Just write down all the bills and money you spend. Then you can figure out how much you need to pay for bills and how much you have left over to spend on other things. You can also sell your home and move into a smaller one if you need to.
The only good thing about filing for bankruptcy is that it takes away the stress of having to deal with many creditors. Most debts are written off when someone files for bankruptcy, so creditors can't go after them after that. But there are many bad things about going bankrupt. With bankruptcy, businesses can be sold and employees can be fired. Most likely, the equity in a home will be sold, because when someone declares bankruptcy, valuable assets that can be counted on are lost.
When someone declares bankruptcy, all of the fees for the courts and trustee are taken from their assets. If you file for bankruptcy, you can't hold certain public jobs, like being an MP or a judge, or even work as an accountant or a lawyer. Also, the new bankruptcy reform law makes it hard to start over financially by filing for Chapter 7 bankruptcy.
Under the old law, you could file for bankruptcy through Chapter 7 or 13. In Chapter 7, you can keep things like the value of your home that are exempt. Here, most people get rid of their debts. In Chapter 13 bankruptcy, on the other hand, you have to agree to pay off all of your debts over three to five years. So, under the new bankruptcy law, most people who want to file for bankruptcy must do so under Chapter 13.
Also, the new law says that before you can file for bankruptcy, you have to meet with a credit counsellor for six months. This is hard to do, though, because there aren't enough credit counsellors. Before you can get rid of your debts, you also have to pay for and go through money management classes. But before doing anything, it's always best to talk to a good bankruptcy lawyer!
