Deciding if filing for bankruptcy is a good decision for you can be frustrating and really difficult. Many consumers wonder if bankruptcy is even an option for them, or if it is something they would benefit from. I understand, after interviewing many potential bankruptcy candidates, that they all seem to fear the same thing.
For example, they fear that their credit score will be damaged forever. They also fear that they will not be able to keep all of their property and / or assets.
The reality of filing for bankruptcy is that most consumers who qualify for Chapter 7 and / or Chapter 13 can keep most, if not all, of their assets. They can also discharge most of your unsecured debts.
What consumers need to know is that filing for bankruptcy is a legal right. Congress passed the Federal Bankruptcy Code (Title 11 of the United States Code) to allow consumers in financial distress to seek relief. Creditors have been very effective in spreading misinformation and making consumers feel like a failure if they seek the protection of the code.
I am not suggesting that a consumer should be proud to file for bankruptcy. However, I suggest that consumers should not stop and base their financial life on a number (credit score) or an opinion from a bank or creditor. We must remember that taxpayers have bailed out the banks and large corporations. If you need a ransom, the United States passed the United States Bankruptcy Code and the President of the United States signed it into law.
Bankruptcy can help you get back on your feet. Chapter 7 can cancel most of your unsecured debt and allow you to start building credit as soon as you can establish your credit worthiness again. To do that, you can establish credit by having a history of complete and on-time payments. It is nothing more than a myth that consumers believe that they cannot access credit or that they will not be able to borrow money due to bankruptcy.
In fact, most consumers after filing for bankruptcy (even before discharge is granted) begin to receive many credit card offers and loan applications. I generally discourage my clients from entering these types of transactions or seeking credit again because these offers and terms are generally not very good. They generally have higher interest rates, high penalties, and / or application fees.
The number one alternative to bankruptcy that consumers can look for is some type of debt consolidation plan. There are very few reputable companies that can help a debtor to properly consolidate his debt. Most debt consolidation companies will also preach and teach that a consumer must consolidate to avoid filing for bankruptcy. The problem with their system is that they generally advise the consumer to fall behind on their payments so that they can have more leverage in negotiating their debt.
You must understand that under the Bankruptcy Code there is no negotiation. Either the debt is discharged or it is not dischargeable. In other words, the creditor has very little power to determine the outcome of the bankruptcy. If a creditor does not want to accept terms or does not want to negotiate with the debt consolidation firm, they simply will not accept any of the proposed terms. They are very hard and very difficult to treat. However, under the terms of bankruptcy, they must comply. This is one of the main advantages of filing for bankruptcy.
It is crucial that you speak with a bankruptcy attorney if you find yourself in a situation where you feel like you cannot sleep at night or if your debt is affecting your health and family relationships and you feel like your options are running out. However, speaking with a bankruptcy attorney to determine if filing is an option for you is good advice.
Most bankruptcy attorneys will provide you with a free consultation to sit down with you and review all of your finances and determine if you are a qualified candidate. You lose nothing by contacting an attorney. If bankruptcy is not an option for you, for whatever reason, at least you know what your situation is.