Is Filing for Bankruptcy Right for You?
Almost all of us have felt anxiety from overspending or living beyond our means, and the inevitable stress coupled with doubts and questions about paying bills. Many of us have dreamt about wiping our financial obligations clean and making a fresh start. If this situation sounds all too familiar, you may have considered filing for bankruptcy as a solution to your financial woes (for more about types of personal bankruptcy protection please see Understanding Bankruptcy). Before choosing to file it is crucial to weigh alternatives and understand how this remedy may impact your future. While challenging, conquering your debt may be preferable to the repercussions that frequently accompany this serious legal proceeding.
Whether bankruptcy offers the best solution may depend on what kind of relief you seek. If you absolutely cannot meet any of your financial obligations, it may be appropriate. Or, if you are hoping to avoid foreclosure, catch up on missed mortgage payments, prevent repossession, stop harassment from creditors, restore utility service, or challenge creditors� fraudulent claims. But, it is not a cure-all. If creditors are secured by a mortgage or lien on property you treasure and desperately want to you protect, bankruptcy may only compel them to accept a payment plan. If you cannot make the payments, they can still force a sale and collect any proceeds. Though, bankruptcy will likely protect you from paying supplementary funds. Child support, alimony, student loans (with some exceptions), criminal fines or certain taxes also cannot be discharged. And, if a family member or friend has cosigned a loan for you, he or she will not be protected through your bankruptcy proceeding.
Marital status will also impact the effects of filing. If married, a debtor can file individually, but his or her spouse will still be liable for joint debt. A joint filing may double the amount of exemptions (property not subject to liquidation) permitted. If only one spouse carries debt, or only one spouse has debt that is not dischargeable, it may be sensible to have only one spouse file. When spouses have joint debt, and one seeks bankruptcy protection, the record may appear on the other spouses credit report.
Depending on its severity, there may be an alternative means to resolving your financial crisis. It is worth the time to contact your creditors and attempt to negotiate a payment plan. Frequently creditors are willing to cooperate, since their number one concern is getting paid. Consider a debt consolidation loan to pay off all creditors, which will then leave you with only one loan payment to sustain. Many states also propose unique credit counseling plans, in which creditors are amenable to lowering interest rates and accepting reduced payments upon entry into a debt repayment plan. Generally these plans allow a debtor to make monthly deposits with a credit counseling service, which are used to pay creditors according to a payment schedule developed by the counselor.
Although today the social stigma surrounding bankruptcy is somewhat curtailed, it still carries assorted negative implications. Records will remain on a debtor�s credit report for up to ten years. More significantly, many who file never attend to their serious spending problems and wind up in trouble again, relying on this option as fallback solution. To prevent this, subsequent Chapter 7 case may only be filed again after six years from the date of original filing. System abuses by debtors have also motivated credit and finance companies to seek protection from bad faith repeat filings and those who are simply looking to avoid paying their bills.
One of the most devastating impacts of filing for bankruptcy is emotional. While initially there is great relief, many individuals eventually deal with overwhelming feelings of guilt and failure. Realizing that they starting their lives over again is often a painful and difficult reality, especially for those who have lost priceless belongings.
Under extreme circumstances this legal remedy may be the best solution, offering a second chance for an innocent person to recover from an unforeseen damaging misfortune. The law prohibits discrimination against those that have filed a bankruptcy petition or failed to pay dischargeable debts. Therefore, assuming those who file address the root of their financial problems, bankruptcy may provide a maximum opportunity to rebuild their future.
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