3 Facts You Need to Know About Bankruptcy
3 Facts You Need to Know About Bankruptcy
Are you considering filing for bankruptcy? Before you do, here are some very important things you must know.
1.
Don’t make the decision rashly.
Make sure you take time to educate yourself about the
proceedings. Bankruptcy will impact your credit for ten years down the road, so
it’s by no means the “clean beginning” many views it as. And in some instances, you still have to pay off your obligations.
Before you decide, you need to figure out what possessions
you will be allowed to retain, which ones will be liquidated, etc. In some
instances, you might even lose your job. You need to factor all this in.
2.
What chapter will you file for?
This is the first thing to think about, and it makes a big
difference. Should you be earning higher than the average income of a
comparable family in your state, you won’t be allowed to go for chapter seven.
This is where your debts are completely wiped out, and is obviously
the one most people would prefer. Your
only choice would be to go for chapter thirteen, which is a repayment plan.
This is mostly because you have the income to make it work.
In this case,
you are given a trustee who determines which
of your things must be liquidated in order to cover your obligations. In most
instances, you can retain your residence, but some areas will take this as
well.
3.
But you might not have to file.
First, you need to think over your money situation long and
hard. In many instances there are options. Think about whether you have
sufficient cash flow.
If you are only able to make the lowest payment possible and are constantly using your credit card because you don’t have money
available, bankruptcy may be something to consider since sooner or later you
are going to run out of credit lines.
If things are still relatively manageable, here are there
effective alternatives to bankruptcy:
#1) Track your spending
Take a long and hard look at your spending habits. This
shows you the primary places your money is disappearing. This will help you
figure out where you need to get it under control.
#2) Get credit counseling with a credit hero.
This sometimes helps you lower your obligations. But these
companies will only work with you if you have a certain level of income.
#3) Get a debt consolidation loan
In many instances getting a secured loan against your home
is smart because this will give you the cash flow you need to pay down your
credit cards. The risk, of course, is that your home will be repossessed if you
can’t make your payments. But if you’re sure you can make the repayments and
are committed to it, this may be a smart option to consider.
The bottom line is, that bankruptcy should be your last resort.
Make sure you have no other avenues available. Only then should you file.
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