Top reasons on why to shun from a bankruptcy hearing!
Most people who have a hefty amount of debt that they are failing to finish paying off, at one time or another have thought about the option of filing for bankruptcy. In this brief writing I am going to give you a couple very solid reasons as to why you should steer clear from bankruptcy at all costs, if possible. Many people in debt don’t recognize the very negative blow a bankruptcy can have.
1. Filing for bankruptcy has an enormously negative effect on your credit score and becomes a permanent public record!
A bankruptcy proceeding is one of the nastiest negative remarks that you could have put on your credit report. Thus making any additional credit you try to get extremely difficult, and if you do receive credit it usually comes accompanied with a very elevated interest rate. Plus, it will reside on your credit report for between 7-10 years. Even once it is removed from your credit report it stays a public record for the remainder of your life. So whenever you apply for new credit at any point in the future, when they ask whether you have ever gone through a bankruptcy proceeding to avoid breaking the law you must answer yes.
2. New Bankruptcy laws in 2005!
In 2005, Congress passed a piece of legislation which makes anybody filing for a Chapter 7 bankruptcy proceeding, which will wipe the slate clean of all your debts much harder. Basically if you have an income and a home than most assuredly you will go into a review to determine if you should go through consumer credit counseling first for at the minimum 6 months. According to NFCC close to 80% of people in debt who apply can not abide by the strict rules set from the credit counseling companies to finish the program thus tossing them back into the bankruptcy filing. That’s when Chapter 13 comes into play which is a method of personal bankruptcy in which the court system will determine how much you will pay back each collector you list based on your budget.
3. Court Controlled Income with Chapter 13!
Before the new law was put into place in 2005 many people that would be able to claim Chapter 7, were now forced to go Chapter 13 instead. Chapter 13 requires that you go over with the court and disclose all of your finances. You must show all forms of income and assets. The court will go over your monthly expenses compared to your income and then determine how much money you will have to pay each month. You do not have much of any say in this process. If you have liquid assets such as a paid off car they can force you to sell them off, within State law, to pay down your debt. There are scheduled financial hearings each year and if your money making abilities change you must report this to the court, this could increase the amount you pay back. If you have multiple family cars you might have to sell one to help pay off your debts. They for lack of better words tell you what you can do with your money. If you have the premium cable you will be forced to cut back to normal cable, if you eat high priced steaks every night you will need to cut back to burgers. This could be a extremely painful and embarrassing proceeding.
These are all extremely negative proceedings that people should be made aware of prior to meeting with a bankruptcy attorney. Many attorneys will down play these negative facts of claiming bankruptcy. Bankruptcy is there for a purpose and for some individuals they have no other method available to them and must file bankruptcy, however a lot individuals go into bankruptcy unnecessarily. A great substitute option to bankruptcy is debt settlement. With debt settlement in most cases you will save more money than you could have through a Chapter 13, plus you will be out of debt much quicker, and not undergo the multitude of negative consequences of a bankruptcy proceeding.
Steve Bis is a debt analyst with the US Consumer Advocate, which practices debt relief.
- Steve Bis
Tags: Bankruptcy, Business, Credit, Debt, Finance, Finance
