Many people see personal bankruptcy as a way of eliminating their debt and beginning again with a fresh start. However, there are a lot of negative consequences associated with bankruptcy. Bankruptcy does not always eliminate all of your debt, as there are a variety of different debts that cannot be included in the bankruptcy, and it includes the associated bankruptcy fees. There are a variety of different steps that can be taken in order to avoid filing for personal bankruptcy.
Although you can file bankruptcy on your own, with all of the new laws in place, it is generally recommended that you hire a bankruptcy attorney to help walk you through the proceedings and file the paperwork for you. Unfortunately, attorneys are not cheap. As well, there are a variety of different fees associated with filing bankruptcy, such as administrative fees, filing fees and trustee charges. Therefore, all of the fees can easily make your financial situation even worse.
If you are in a situation where you can no longer pay your bills, then it may be time to consider selling your home. If you choose to file chapter 7 bankruptcy, you stand a good chance of losing your home. You will be required to sell of your non-exempt assets in order to pay for your outstanding debt. Therefore, it would be wise to sell your house on your own and use that money to pay off your debt. You can then choose to purchase a smaller, less expensive home or rent for a while until you get your finances under control.
Your credit score will also be negatively affected once you file bankruptcy. A bankruptcy will appear on your credit history for 7 years. Therefore, when you go to purchase any items where you may need to use your credit, you will generally be required to pay a much higher interest rate. And in some situations, you may even be turned down for the loan or credit card.
Creditors are not the only ones checking on your credit score. Employers, as well as insurance companies often pull up your credit history. Insurance companies may charge higher rates to someone who has a lower credit score, than someone who has a higher score.
Another option that can be used in order to avoid bankruptcy is debt consolidation. If you are currently a home owner and have equity in your home, you may want to consider obtaining a home equity loan. The loan can then be used to pay off your smaller debts as well as save on your interest rates. Home equity loans generally come with a low interest rate, which can make it easier to make the monthly payments. By consolidating your smaller debt, you are then left with one easy to make monthly payment, which is generally much lower than when paying them separately.
For some people, bankruptcy may be their only way out of debt. However, if at all possible, there are a variety of different options that can help you avoid filing personal bankruptcy. If you are able to avoid bankruptcy, you can avoid a lot of the negative implications that go along with it.