Is Bankruptcy Right For You?

2007-03-08 10:33:40

( Legal )



Bankruptcy is one of the ways that you can do to shield yourself from creditors or companies whom you owe from aggressively collecting your debt from them. Although effective, it may also seem somewhat desperate. It is essentially intended to give you a clean slate in terms of credit ratings.

How to file bankruptcy is relatively as easy as 1-2-3, however, the consequences of doing so may be something that will make you regret. Just make sure that before signing any form of agreement that legally identifies you as bankrupt, you are fully knowledgeable of the consequences and effects of the bankruptcy to your finances.

Bankruptcy is usually the last resort of people who realize too late that they are over their heads in debt. Being bankrupt shields you away from companies that you owe, but that doesn’t end there. Chapter 7 bankruptcy gets rid of your debts by agreeing to a legit contract that your collaterals shall be repossessed or foreclosed by the creditor, whichever is applicable. After so, you will be discharged of indebtedness. Chapter 13, contrarily, gives you the option of not losing your collateral, provided that you agree to repay your debt over a period of time, with monthly installment of your payment.

To avoid fleeing to bankruptcy, here are some alternatives. You may get in touch with your debtor and fully explain to them your current situation. The best thing that you could do is forge a deal with them by arranging a special payment plan for you. You can also apply for a debt consolidation loan from the bank. The bank temporarily pays off your debt, and you pay them monthly in return.

Beware, however, of traps that could cause you graver danger than being in debt. Once you miss a single repayment, you will lose your bankruptcy, and shall be drawn to deal directly with the debtors. Consignors or joint account holders will also be involved in the proceedings once a bankruptcy case is declared official. After successfully going through bankruptcy, be advised that your bankruptcy history will stay for 10 years on your credit records. For mortgages after bankruptcy, you may avail of these but usually with higher interest rates and higher valued collaterals. If you do apply for future loans, it may take much longer than usual.

Some of these may take more effort and may be risky, but avoiding to be identified as bankrupt may provide you a clearer and a stable credit record in the future.


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