Reference -
Bankruptcy Help - The Effects of Filing
and Alternatives to Review First
Filing for Bankruptcy, regardless of whether chapter 7 or chapter 13
may have long lasting negative effects on your credit history for up to
10 years. These negative marks against your credit history may make it
difficult to apply for future credit, secure jobs that require a
positive credit profile, rent an apartment, purchase a vehicle, etc. The
cost of filing bankruptcy can add up over the course of years. Banks or
other lenders will most likely charge higher interest rates and fees
should they choose to lend money. Bankruptcy is deemed as a high credit
risk and therefore to compensate for the risk lenders charge higher
interest rates and/or fees. Bankruptcy can have a severe negative impact
on relationships or marriages. The stress of bankruptcy leads to many
separations or even divorce. Financial problems create much unneeded
stress on relationships, filing for bankruptcy does not offer the fresh
& clean start that many seek when filing and that carries over into
relationship difficulties in many cases.
What can you do to Avoid Bankruptcy?
Live Within Your Means
Avoid getting into debt trouble to begin with. Do your best to avoid
charging credit cards for every day living expenses. Look at your
current financial situation. Are there charges that you pay monthly that
are attached to a credit card payment such as utilities, cell phone
bills, magazine subscriptions, grocery bills, etc.? Review your budget
to find unnecessary charges to your credit cards that you can manage
without.
Identify the Debt Problem Early
Being proactive rather than reactive to your debt problems is the key
to avoiding bankruptcy. Many individuals are able to avoid bankruptcy by
realizing their debt problems early, therefore leading to more time for
those individuals to regain control of their finances. One
recommendation is to create a monthly personal budget report. This will
lead to earlier detection of potential problems. By doing this an
individual can also identify their savings potentials as well. Saving
money now, regardless of amounts, will help for future emergency needs.
Review all of Your Options First
There is a common misconception that filing bankruptcy gives an
individual a fresh start on their credit. This is simply not true.
Filing for bankruptcy has several long lasting negative impacts as
outlined above. One of the first things that should be done is to speak
directly to your creditors. They may be able to work out arrangements
that would allow you to pay less than the minimum amounts for a short
period of time. Sometimes this is enough to help an individual avoid
bankruptcy. Another option is to look at getting a part time job or
selling assets to avoid filing. Selling your assets should be a last
resort, however in the long term this can help avoid the long lasting
impact of bankruptcy.
Seek Help
Seek advice from a non-profit Credit Counseling agency. Look for a
Credit Counseling or Debt Management provider that offers a free
consultation. Keep in mind that Credit Counseling / Debt Management
organizations are designed to assist an individual with their finances
first and then provide debt reduction services second. You may find that
with a few minor changes you may be able to avoid filing and repay your
debts on your own.
Avoid Debt Settlement companies. Debt Settlement, in many cases is
viewed as filing for bankruptcy by many lenders. This may sound like a
quick fix however nothing beats repaying your debts in full, whether on
your own or through a Debt Counseling / Debt Management company.
Use bankruptcy as your last option. Some situations can spin out of
control very quickly. Just be sure that you review all situations before
filing.
Written by Rick Munster
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