It happens to the best of us. Before you can say \”charge it!,\” the amount on your credit cards becomes unmanageable, and you can\’t even make the minimum payments. It causes severe stress and you start looking for the quick way out of the situation. Bankruptcy might seem like a painless solution, but that\’s not true. Consider the following:
You don\’t get to keep all your assets You must liquidate most possessions of value. After all, it\’s not fair to your creditors to be left \”holding the bag\” while you continue to enjoy the benefits of the debt. Your credit will take a big hit Bankruptcy is a serious black mark against your credit that will haunt you when you want to buy a home or get a loan. It could also be a deal-breaker for employment. Many employers review financial history and will have concerns about a bankruptcy.
Defaulting on your debts can\’t done often You can only file for Chapter 7 once every 8 years. What happens if you get yourself in the same mess again in a few years? Your options will be severely limited. Forget about privacy When you declare bankruptcy, you are forfeiting your rights to privacy. The court will demand a detailed summary of your finances, and it will be a matter of public record.
Know your rights as a consumer You might not know that there is legislation that is meant to help consumers who are in this situation and it says that you might be entitled to dropping some of the interest and late fees that you\’re facing and that could reduce the amount you owe by hundreds or even thousands of dollars. Make sure to study up on this before you decide to contact your bank card companies to negotiate a settlement amount on your accounts.
It\’s not an easy process You will need to show the court you went through credit counseling and completed a debt education class within 6 months before you file. There are filing fees and a lot of red tape. Considering all the downsides, defaulting on your debts might not be the solution. The reality is there is not a quick fix! You might be better off simply deal with the debt.
Debt consolidation loans Debt consolidation loans usually require collateral, such as your home. You\’ll have more time to resolve the debt. Your creditors will have more reassurance from the collateral at stake, and will be able to take ownership of the collateral if you default. Debt consolidation loans will not have devastating effects on your credit. Furthermore, a debt consolidation loan will most likely take less of a toll on your peace of mind and financial self-esteem.
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