Deciding whether filing bankruptcy is a good decision for you can be frustrating and really difficult. Many consumers find themselves wondering if bankruptcy is even an option for them, or if it is something that they would benefit from. My understanding, after interviewing many possible candidates for bankruptcy, is that they all seem to fear the same things.
For example, they are afraid that their credit score may be damaged forever. They are also afraid that they may not be able to keep all their property and/or assets.
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The reality of filing bankruptcy is that most consumers that qualify for Chapter 7 and/or Chapter 13 are able to keep most of their assets, if not all of them. They are also able to discharge most of their unsecured debts.
What consumers need to know is that filing bankruptcy is a legal right. Congress passed the Federal Bankruptcy Code (United States Code Title 11) to allow consumers in financial distress to seek relief. Creditors have been very effective at disseminating misinformation and making consumers feel they are a failure if they seek the protection of the code.
I am not suggesting that a consumer should feel proud of filing a bankruptcy. Nevertheless, I am suggesting that consumers should not stop and base their financial life on a number (credit score) or an opinion from a bank or creditor. We must remember that banks and big corporations have been bailed out by tax payers. If you need a bail out, the United States passed the US Bankruptcy Code and the United States President has signed it into law.
Bankruptcy can help you get on your feet. Chapter 7 can discharge most of your unsecured debts and allow you to start building credit as soon as you are able to establish your credit worthiness again. To do that, you can establish credit by having a history of complete and timely payments. It is nothing more than a myth for consumers to believe that they cannot access credit or they are going to be unable to borrow money because of a bankruptcy filing.
As a matter of fact, most consumers after filing bankruptcy (even before the discharge is granted) start receiving many credit card offers and loan applications. Typically, I discourage my clients from entering these kinds of transactions or to look for credit again because these offers and terms are usually not very good. They typically have higher interest rates, high penalties, and/or application fees.
The number one alternative to bankruptcy which consumers can seek is some sort of debt consolidation plan. There are very few reputable companies that can help a debtor properly consolidate their debt. Most debt consolidation firms will also preach and teach that a consumer should consolidate so they avoid filing bankruptcy. The problem with their system is that they typically advise the consumer to get behind on your payments so they can have more leverage to negotiate your debt.
You must understand that under the Bankruptcy Code there is no negotiation. Either the debt is discharged or it is undischargeable. In other words, the creditor has very little power to determine the outcome of the bankruptcy. If a creditor does not want to take terms or does not want to negotiate with the debt consolidation firm, then they will simply not take any of your proposed terms. They are very tough and very difficult to deal with. However, under bankruptcy terms, they must comply. This is one of the main advantages of filing bankruptcy.
It is crucial that you talk to a bankruptcy attorney if you are in a situation where you feel that you cannot sleep at night, or your debt is affecting your health, family relationships, and feel like you are running out of options. However, talking to a bankruptcy lawyer to determine if a filing is an option for you is sound advice.
Most bankruptcy lawyers will give you a free consultation to sit down with you and look over all of your finances and determine whether you are a qualified candidate. You lose nothing by contacting an attorney. If bankruptcy is not an option for you, for whatever reason, then at least you know where you stand.
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