Although it seems like an “easy out”, consumers should do everything within their power to avoid bankruptcy.  While bankruptcy can eliminate debts or reorganize debts by selling off assets or by repayment plans, depending on the chapter that you file, it can also leave you with problems for the next seven to ten years or longer.  Some good reasons to avoid bankruptcy include:

• You’ll have horrible credit following bankruptcy. Avoid bankruptcy to save your credit score.  Filing bankruptcy can cause your credit score to plummet.  Both chapters of bankruptcy, including chapter 7 bankruptcies and chapter 13 bankruptcies, can have a negative impact on the filer’s credit score.  Traditionally, bankruptcy can cause a loss of at least 250 points off your FICO credit score. What’s more, this negative notation on your credit report can remain on there for up to a decade.  This can make it hard for you to qualify for credit or loans for the next several years or longer.

• You can lose everything that you own to creditors. Avoid bankruptcy and keep your property.  Filing for bankruptcy under chapter 7 rules can cause you to lose certain assets.  The court can order these assets to be sold in order to repay your creditors.  And depending on where you live, your situation and the laws in your state, you could even lose your car and your home.

• You cannot eliminate every debt via bankruptcy.  When folks think of bankruptcy, they envision ridding themselves of all of their debts. This is simply not true.  Student loans, taxes in arrearage, child support or alimony and some other debts are not subject to bankruptcy proceedings and cannot be discharged in bankruptcy court.  Avoid bankruptcy altogether if you are looking to get rid of these debts.  The law doesn’t allow for it.

• You may put your retirement at risk.  If you live in a state where exemption laws do not protect your IRA, 401(k) plan, pension plan or other retirement plan, avoid bankruptcy to protect your retirement.  In some states, these plans are tapped into to repay debts under chapter 7 bankruptcy proceedings.

There are options that you can use to avoid filing bankruptcy.  In most instances, bankruptcy should be considered only as a last resort. Consumers have a variety of options to help them avoid bankruptcy, including the three most popular listed below:

• Debt settlement – Debt settlement is a solution to avoiding bankruptcy that allows you to negotiate with your lenders and creditors to reduce the amount you owe.  Debt settlement is sometimes called debt reduction.

• Debt consolidation – Debt consolidation helps consumers to avoid bankruptcy by allowing them to make a single monthly payment at a reduced rate of interest, consolidating all of their bills into one monthly payment that fits their budget.

• Debt management – Debt management can help you to avoid bankruptcy by helping you to reduce your penalties and interest rates due to creditors.  In turn, you would then make monthly payments to debt consolidation companies that are more in line with what you can afford to pay.

Get started toward your financial freedom today.  Fill out the form above to help avoid bankruptcy.

Share and Enjoy