In today's hard economic times, people are declaring bankruptcy at an alarming rate. Bankruptcy is the legally declared inability or impairment of ability of an individual or organizations to pay their creditors. In short, you or your business is broke and you cannot pay off your debts.
For too long this has been seen as an easy escape from hounding creditors. Let me assure you this is not the case. Declaring bankruptcy will alleviate threatening phone calls and your responsibility for certain debts, but what is the true cost?
The devastating effects of declaring bankruptcy will follow you for many years, showing up on your credit report and affecting your ability to obtain credit for 7 to 10 years. So taking the extra time to examine other options is always sound advice. Do not get suckered into a situation that is going to leave you in worse shape than you were to begin with.
When you simply cannot pay the debts you owe and decide that declaring bankruptcy is the only way it can be helpful to know what to expect. First, let us look at some financial issues it will not help with. Filing for bankruptcy will not discharge your debts for child support, back taxes, civil judgments, school loans, or bad checks. If you have any debts of these types, you will still have these debts even if you do declare bankruptcy.
Now let's look at a few areas bankruptcy can cover. It will eliminate and discharge debts you have which include secured loans (although you will need to surrender the security or collateral), unsecured loans, utility bills, hospital bills, and credit card balances. This is by no means an exhaustive list and you should check with an attorney for possible changes.
To declare bankruptcy you will need to gather all account numbers and balances owed and take them to a qualified attorney. Your attorney will then discuss with you the options that are available, such as which chapter of bankruptcy you qualify for. He will also discuss with you any options you may have besides bankruptcy. He will prepare your case and set you up to go before a bankruptcy judge. You can expect that this will take anywhere from two months to a year depending on the complexity of the case.
It can be tempting to try one of those do-it-yourself kits or service. But the reality is that this could be even more detrimental to your financial situation because these kits are often not up to date with code changes. Changes have been rampant in the past few years and the only people qualified to interpret them is a bankruptcy attorney. The laws even vary from state to state, although you are obligated to file in the state in which you are a resident. If you do it yourself, you may find you have given up more than you needed to, or may make an error and need to start all over again, so the fees charged by a bankruptcy lawyer will pay for themselves in spades.
Declaring bankruptcy should be a last resort, not a first choice. There are many other options out there. The easiest thing to do is call your creditors and explain your situation. In most cases, these are human beings who are willing to help you find a way to settle your debt. Some credit card companies will even dramatically slash the interest to get the bill paid. If all that fails, your city or state should have a consumer credit debt counseling service. It is a service that can, among other things, talk to your creditors about debt consolidation or debt forgiveness.
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