Sometimes people consider bankruptcy to be an easy option to free themselves from the burden of mounting debt. In fact, rather than addressing the root of the problem this the first option that comes to their mind. The truth is that this may eliminate the burden but its not an easy thing to do. Furthermore, bankruptcy should always be your last option.
At first glance it may seem that the filing process for bankruptcy is very easy. But, its not that trivial. The justification for your filing will begin with showing your financial history to a judge and it will also be open to any objections that your creditors might have. More than likely, your creditors will fight tooth and nail to get their money back rather than willing to settle.
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In the event that you actually are able to file bankruptcy successfully, you should consider the effects of this action on your future.
Credit cards with any balances outstanding will be lost while some other creditors will close your accounts. Getting a large credit line or a home loan at an affordable interest rate will be near impossible.
You will still owe debts such as taxes owed from the past 3 years, student loans, and any others which are exempt from bankruptcy protection.
How long will this last you ask? Ten years! During these ten years, you will have to maintain a spotless credit history to get a level where creditors can trust you to a certain degree. On your credit history, the bankruptcy will stand out as the most negative criterion. This is much worse than a low FICO score.
These are the effects of your credit. Besides these, you could have to give up any other assets depending on when you got them. You will not lose your house and your car in most states. However, if you have additional vehicles or real estate these might not be protected.
Don't forget that this procedure of filing bankruptcy is not free. There will be costs associated with the courts and of course your attorney is also going to charge you. These costs will only compound your financial misery.
All is not lost. You will be able to obtain some breathing room to start the recovery process of your financial situation. Your debt collectors will stop bothering you. If they don't notify them of your filing. Any actions of foreclosing your house will stop. If you are contemplating filing bankruptcy, you will be better off by filing sooner than if its too late. The sooner you file, the sooner you will be on your way to rebuilding your credit history (perhaps better than the one you built last time around).
Now that you won't have credit cards this might be a blessing in disguise. You will have another opportunity to change your spending habits.
Do your due diligence before you take the big step. Good luck!
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