Debt Elimination

5 Reasons Why You Should Avoid Filing for Bankruptcy

The federal court’s process of bankruptcy helps a debtor negate his debts, reorganize them by selling his assets, or by initiating a repayment plan. However, as easy as it sounds, filing for bankruptcy is not the quick and easy solution to one’s financial troubles.

You’ll find that there’s a lot to consider and take care of before actually launching into it. So, do not consider this your best option but think of other workable solutions. Do your homework on it thoroughly before deciding on bankruptcy as your best option.

There are several reasons to avoid bankruptcy. Here are 5 salient ones:

1. Your credit is severely hit: Your credit can be severely hit by Chapter 7 and Chapter 13 bankruptcy. It can lower your credit score by about 250 points, and this negative fact stays on your credit report for seven to 10 years, depending on the kind of bankruptcy you file. This makes it difficult for you to obtain approval for new loans and credit for about three to four years.

1. You stand to lose your property: Under the Chapter 7 bankruptcy plan, some of your assets can be sold to pay off your debts.  Your state’s laws and your individual situation will decide whether you will lose your home and car to pay your debts or not. If this happens, it means you will be homeless and the next time you look out for a rental accommodation landlords will check your credit report before finalizing a lease with you, making it tough for you to rent a home.

1. Bankruptcy can adversely affect your finances: Bankruptcy can have a negative influence on your overall financial situation. It could mean that you can’t buy or rent a home or a car. It can also have an adverse impact on the position of your security clearance if you keep your employer in the dark about your bankruptcy and the reason for filing for it.

1. Your creditors could repossess your property: A month after your bankruptcy case ends, if you still have some un-discharged debts your creditors can legitimately sue for them and repossess your car and home to pay off your debts.

1. Bankruptcy leaves your retirement savings unprotected: The exemption laws pertaining to your state will decide if your retirement plans, social security, 401ks, government pension, IRAs, or any other investments can be used to pay off your debts under Chapter 7.