Personal Bankruptcy

How To Avoid Personal Bankruptcy

With so many Americans out of work, and so much debt being accumulated over the years, bankruptcy starts to look like the only way to get creditors to stop calling and get out from under a financial burden that can be overwhelming.  But a big question people ask is what are the negative effects of personal bankruptcy?  Is it worth it to file bankruptcy if you just continue to have credit problems?

Under current bankruptcy laws, if you are working,  you are more likely to file a Chapter 13 bankruptcy, which helps craft a repayment plan for your creditors and does not wipe your credit slate clean.  Once you are on the plan, however, the creditors have to accept the terms and can’t keep dogging you for payment.  But you will have to repay your debts over the course of several years.

For others who are out of work and are facing a difficult job market, a Chapter 7 bankruptcy, where your debts are discharged, coudl be a possibility.  Some debts like student loans or tax liens are not dischanged, but unsecured debts can be eliminated.

For secured debts, however, such as cars and homes, you could be forced to sell or return the property to the creditor, depending on  your state. Contrary to popular belief, only in some states is your home protected from foreclosure if you file bankruptcy.  If you are working through a Chapter 13 repayment plan, you might be able to keep your home if it is clear you can continue to pay your mortgage.

Keep in mind that a bankruptcy will stay on your credit report for ten years, and is worse than simply having delinquent debts.  It may take several years of current payments after a bankruptcy in order to be able to qualify for credit once more.  In today’s difficult economy however, getting credit is nearly impossible anyway.  It’s best to check with a bankruptcy attorney before declaring person bankruptcy to see whether or not it is right for you.

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