Bankruptcy

Should I file Bankruptcy?

The answer is NO! I saved this as the last options because it should absolutely be your LAST resort. I cannot stress enough how bad a bankruptcy will affect your life. A myth is that bankruptcy affords a 'fresh start'. It's NOT true! Today your credit report contains a point score. A high score is what creditors look for as a basis for approving credit applications.

The bankruptcy breakdown
Is there a fee to file bankruptcy?
Will bankruptcy hurt my credit?

The bankruptcy breakdown

There are two types of bankruptcy that apply to consumer debt; Chapter 7 and Chapter 13. With a Chapter 7 bankruptcy, the individual is allowed to keep certain exempt property. Some liens, however (such as real estate mortgages and car loans), survive. The value of property which can be claimed as exempt varies from state-to-state. Other assets, if any, are sold (liquidated) by the trustee to repay creditors.

Many types of unsecured debt are legally discharged by the bankruptcy proceeding, but there are various types of debt that are not included such as child support, income taxes less than 3 years old and property taxes, most student loans, and fines/restitution imposed by a court for any crimes committed by the debtor.

Not all your debt may qualify for bankruptcy either. If you owe for taxes, college that was government funded, child support or anything that is legally required you pay you can not claim bankruptcy to relieve you of these debts. Secured debt does qualify but keep in mind if you include such items in your bankruptcy you can be sure the creditor will take the legal steps required to reposes those items.

You will need to successfully complete two classes which basically teach you how to manage your money for the future. One of the classes you take before your lawyer will file your case and the other you must take after your case has been heard. The institutions that provide such classes are government approved; your lawyer should furnish a list in which you may choose for your convenience. The classes can be done over the phone, in person or on the internet. Once you have filed bankruptcy you can not file again for another 7 years, so these classes are valuable tools in which you stand to gain to avoid the same problems.

Once you have initiated the steps to filing Chapter 7 all of your creditors have to stop pursuing you for payment. This can be a major benefit as creditors cause stress when calling you to collect.

As with anything Bankruptcy has pro’s and con’s. A pro would be you are reaching immediate resolution and relief. Sometimes we find ourselves in messes that are just too difficult to get out. Even with Chapter 13 you should now be able to effectively manage your money and still pay what you owe.

A con is that you are going to have bankruptcy listed on your credit report for 10 years, which is not to appealing to a potential creditor. Furthermore, you have entered into court records and that is open to the public. Now all of your information pertaining to you and your case are free for who ever is interested.

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Is there a fee to file bankruptcy?

The answer is yes. It can be as little as $1,000 and as much as $5,000.

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Will bankruptcy hurt my credit?

The answer to this question is YES. The price of bankruptcy will include a bad credit report for 10 years, the possibility that companies will refuse to hire you and you can be denied insurance as well as a security clearance and licensing. Keep in mind this is all LEGAL. Bankruptcy carries a stigma for life! Public records containing all of your personal information are kept in storage and available for 20 years after the bankruptcy has been discharged or dismissed.

In my opinion, bankruptcy should only be used as a last resort when all other options have failed.

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