Filing Bankruptcy

Dealing with debt is never easy. Your finances may have gotten so far out of control that you’ve begun to consider bankruptcy as an option. But you’re hesitant, and with good reason. You’re hesitant to lose your home; hesitant to lose your car and other additional assets. Are you sure filing bankruptcy is really your best option?

Many people seem to think that it is. In the 2008 fiscal year over 1 million Americans filed for bankruptcy, which is a tremendous increase from previous years. A high volume of bankruptcy filings hasn’t been seen like this since before the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) was passed in 2005. Maybe this is due to the economy slump, or it could be the result of the plethora of inadequate mortgages given out by irresponsible lenders. Whatever the reason, bankruptcy has become more common even though it may not have been the best option for many of the people filing for it.

Advantages of Filing Bankruptcy
When in a tremendous amount of debt, filing bankruptcy may be your only option. In the right context, it can have certain advantages. Some of these benefits include:

• Puts a stop to debt collectors’ harassing letters and calls
• Can prevent or halt wage garnishments (automatic deductions from your salary to pay your lenders)
• Can stop lawsuits from being filed against you
• Can offer you a fresh, debt-free financial beginning

Also, it’s a misconception to assume that an individual will definitely lose their home when filing bankruptcy, as many states have certain exemptions for essential property written into their bankruptcy laws.

Disadvantages of Filing for Bankruptcy
However, there are also several disadvantages to bankruptcy that one should consider before delving into the legal process. These drawbacks include:

• Filing for bankruptcy is one of the worst marks that can appear on your credit score. Your credit rating will suffer greatly in most cases, and it may become extremely difficult to apply for any type of loan after you file. It’s unlikely that you’ll be able to fully recover a healthy financial status until the negative effects on your credit score expire. How long does this take? Depending on circumstances, it could take up to 10 years to have a clean credit score again.
• Another disadvantage of filing bankruptcy is that the debt may be passed onto your spouse or partner, either forcing them to pay off the debt or file for bankruptcy as well.
• While your children are generally unaffected by your decision to file for bankruptcy, money can be deducted from any amounts they are set to inherit if you were to pass away.
• Most of your property and assets will be liquidated.
• You will lose credit cards and be unable to obtain a mortgage for a set period of time.
• You will still be responsible for some debts, such as child support, alimony and divorce debts.

Is Filing Bankruptcy Worth It?
Since there are alternatives available to filing for bankruptcy unless you are forced to do so, it’s probably not your best option. There are other means for dealing with your debt. Just about all the said advantages about bankruptcy can be reached equally through other means of debt elimination, without the fierce negative effects on your credit report.

For example, successfully consolidating your debts can cease debt collectors from calling, stop wage garnishment, and halt pending lawsuits without damaging your credit for 10 years. If more people knew about alternatives to bankruptcy, the rate for filing last year may not have increased so dramatically. Consult our Bankruptcy FAQ for more info.

However, it’s definitely worth noting that there are some situations where filing bankruptcy may be your only option, if your debt has gotten too far out of control. To find out if you’re eligible for the alternatives to bankruptcy that can help get you out of debt, please fill out the free evaluation below. It’s time to start getting your life back, and you don’t have to sacrifice 10 years of good credit to do it.