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Understand Bankruptcy Before Filing

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Understand Bankruptcy Before Filing

For people living with a tremendous amount of debt, bankruptcy can be very tempting and may seem to be the only option. Filing for bankruptcy will pull you out of debt and provide some relief, but there are consequences to filing as well. Bankruptcy damages your credit score and puts a large black mark on your entire credit report, and therefore has serious negative consequences if you need to apply for a loan again in the near future. Lenders will likely immediately dismiss your application for a loan once they see that you have filed for bankruptcy, as they fear you are not creditworthy and have a history of being unable to repay loans. Bankruptcy does not stay on your record forever, but it does remain for seven years.

Seek Professional Advice

It is important to keep these consequences in mind if you are considering filing for bankruptcy, and it is not a decision that should be made alone. Seek bankruptcy filing advice from a reputable non-profit credit counseling agency that offers a bankruptcy education course. For people considering filing bankruptcy, this is critical as pre-bankruptcy counseling is required by law before filing can occur.

Through pre-bankruptcy counseling, trained credit counselors can help assess your individual situation to help you determine your best course of action. Counselors are unable to offer legal advice, but they do provide education on current federal bankruptcy laws – including the different types and chapters of bankruptcy – as well help you explore all other options that may be appropriate and available to you instead of bankruptcy.

For some people, a debt management plan can help eliminate debt and put finances back on track without resorting to bankruptcy. Under a debt management program, your debts are consolidated and you make one monthly payment to your credit counseling agency, who then divides the payment to your different creditors. Not only does this ease the burden of making multiple payments each month, but counselors will work on your behalf to negotiate lower payments at lower interest rates to help you get out from under your debt in a more manageable way.

However, debt management may not be appropriate for everyone. For others, bankruptcy is, in fact, the best option.

Regardless of the debt relief that is right for you, trained, compassionate credit counselors at a non-profit credit counseling agency will put your needs and best interests first and devise a plan that is right for you.

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