Reasons Why You Need To Avoid Bankruptcy

Bankruptcy, although it is a legal and effective way to get out of debt, should always be your last option. It will leave your finances with so much credit damage that it is sometimes not worth it - especially when you have another option that can help with your credit situation.

There are many reasons why you need to avoid bankruptcy even if you have the debt relief qualifications to file a petition. Here are some of them.

• It can ruin your credit score. First and probably the most important reasons to stay out of this debt solution is the fact that it can lower your credit score by an average of 200 points. It will be really bad for the next couple of months. While you can improve your credit ranking slowly but surely, the taint of bankruptcy will stay with you for the next 7 to 10 years. That can keep you from some important financial opportunities in the future.
• It will be difficult to get credit approval. When you file for bankruptcy, lenders will stay away from you - at least for the next two years. If you need to get a personal loan to help with an emergency situation, you will find a hard time to find someone to lend you money. Bankruptcy tells them that you are not responsible with your money. Even if you filed because of a sickness or something that was beyond your control, financial irresponsibility will be the first thing they will associate with this credit record.
• It will be in the public records. The thing about bankruptcy is it will be placed in the public records. Anyone can learn about this embarrassing financial situation in your life. This is one debt solution that will be very difficult to keep from the people around you.
• It can cost you every asset that you have acquired. If you file for bankruptcy and you are qualified for Chapter 7, your assets will be liquidated. That means, they will be taken from you, sold and the proceeds with go to your creditors. While you will not pay them anything because what is not paid with your assets will be discharged, you will have nothing left to your name.
• It can still make you go through a repayment plan. Another reason why you want to avoid bankruptcy is because if you end up with a Chapter 13 filing, you will still go through a repayment plan. You will be left with a ruined credit score, have a hard time getting financial aid and will have it displayed in public records, and still pay your creditors a portion of your debt.

If you want to avoid bankruptcy, you have the option to go for debt settlement - especially when you think that you will be qualified to file for Chapter 13. Settling your debt will result in debt reduction - at least, if you do it correctly. Find out about your options before you finalize your decision to declare yourself bankrupt. You might find it to be more fulfilling to get out of debt without ruining your credit too much.

All About The Chapter 7 Bankruptcy Process

Consumer debtors have two options when filing for bankruptcy: Chapter 7 and Chapter 13. Anyone who files that they are bankrupt will have to undergo the means test. This test looks at the income of the filer and when they have an above median average salary (at least in the State where they files), they will be forced to submit to the Chapter 13 bankruptcy process. This involves a repayment plan that the court will decide on and mandate the consumer to follow.

But if the filer is found to be qualified for Chapter 7 after the means test, that could lead to all their debts being discharged. This means they do not have to pay cash towards any of the debts included in the bankruptcy filing. To better discuss Chapter 7, here is the usual process involved.

First is the professional consultation. This is very difficult to do on your own. A bankruptcy lawyer is required to help you understand all the legal details. There are various documents to be submitted and it can be quite confusing. Bankruptcy is not something that you can make a mistake and just apologize so just hire the lawyer to keep it from happening.

Your lawyer will require you to submit a lot of information and you need to comply. Do not withhold any details - even your properties and valuable assets will have to be declared. If you keep some assets and they are discovered, it will cause you some punishment from the bankruptcy court. Give them a list of your assets and the value of each. This can be placed in a Statement of Intention that will also indicate the assets that you want to keep.

You also have to give them your income details and also that of your employment. Lastly, you will be asked to list down your creditors and the amount you owe each of them.

Before the actual filing, you will be required to undergo a credit counseling program. You need to enrol with an agency or company that is approved by the courts or the US Trustee. This is needed within 6 months prior to the filing. It is the effort of the court to educate filers about other bankruptcy alternatives.

Once accomplished, the lawyer you hired will file the petition. All the creditors on your list will be notified anytime during the first 15 days after the filing. At the same time, a bankruptcy trustee will be assigned to analyze your finances. They will be in charged of scheduling any meetings with the creditors and court hearings. One of the meetings is known as the 314 meetings wherein the creditors have the chance to question or object the bankruptcy petition.

You also have to undergo Debtors Education that aims to give you the knowledge that will keep you from another bankruptcy situation. This is another requirement before the completion of the bankruptcy process.

If the creditors all have no complaints or objections, the court will decide the properties that will be liquidated, who will get the proceeds and so on. If there are no properties to discharge, then you will proceed to the discharging of the debt.

All of these take about 2 months to complete. Once that is accomplished, your next step is to start rebuilding your credit score - which should have gone through a significant negative impact since you filed for bankruptcy.

Signs That Chapter 7 Bankruptcy Is The Right Debt Relief

When you are thinking about getting out of debt, one of the first things that may come to mind is to file for bankruptcy. This is the hands down, the fastest and easiest way to get rid of your credit obligations. However, it is also the one that leaves so much mess that if could take a decade to completely remove the stain on your credit report.

In the past, bankruptcy meant liquidating your assets, distributing the proceeds to your different creditors and being free of debt in a matter of months. While that is still true, this is only applicable to Chapter 7. A means test was put into place to separate those who has a salary that is within or higher than the average median income of the State where they chose to file bankruptcy. If they have a high salary, they will be asked to file for a Chapter 13 bankruptcy which usually involves a repayment plan that is similar to debt settlement. You are tasked by the court to pay a percentage of your debt and once you have completed the payment, the rest of what you owe will be forgiven.

Between the two options, Chapter 7 seems like the better choice. If you have to deal with the dreaded stain on bankruptcy, then you may want to stay away from the one that requires you to shell out an amount via the repayment plan. You want to be free from your debt with the least amount of money spent on payments.

However, you need to consider first if it is really the only option that you have. There are bankruptcy alternatives that does not have the same credit damaging effects but can still help you get out of debt easily.

To help you decide, here are the signs that Chapter 7 is the best alternative.

First of all, you should have a very small income. If you want to enjoy the no debt payment benefit of Chapter 7, then you need to have no or very little income every month. If your salary is within the median range, then you may be subjected to the payment plan. If that is the case, you may be better off with debt settlement.

Another sign to proceed with bankruptcy is when you do not have assets to liquidate. Unless it is okay with you to lose the expensive assets that you have, you may be better off to aim for debt settlement or even Chapter 13 bankruptcy. Because of the repayment plan, Chapter 13 does not require asset liquidation.

Chapter 7 is also great for unsecured debts. These could be medical bills, personal loans and credit card debt. It cannot cover student loans, tax related debts and child support.

Ideally, a bankruptcy lawyer should be consulted to see if this is really the right path for you to get rid of your debts. The main basis is your finances - especially your debt payment capabilities. Listen to the expert and trust your gut instinct. More importantly, you have to make the commitment to finish your chosen debt relief program.

Alternatives to Bankruptcy

Bankruptcy is a scary option so as much as possible, you may want to look for alternatives that will steer you away from it.

Truth be told, there are financial situations that can only be solved by bankruptcy. It will, after all, provide you with a speedy release from your credit problems - at least if you qualify for a Chapter 7 bankruptcy. Filing for this is best for those who has little income or has most of it going to their basic necessity expenses.

However, even if you fit the perfect description of someone who can get a Chapter 7 bankruptcy, you need to approach it with great caution. If you want to escape the stigma that only bankruptcy can bring, then you may want to work a bit harder on your debt by opting for another debt relief program.

The obvious alternative is to grow your income or cut back on your expenses so you have more money to allot to debt payments. The idea is to grow your disposable income. This is probably harder because you will either work longer hours or deprive yourself of the things that you got used to. Getting out of debt really requires some form of sacrifice so it all boils down to how much you can really give up. Some couples end up having the husband working 2 jobs while the wife stays at home to take care of the kids and household chores alone. Some are lucky enough to stumble upon a passive income that provides them with a significant addition to their monthly cash flow.

If your efforts to increase your disposable income is not possible, then hope is not yet lost. You have options like debt settlement that will help reduce the outstanding balance on your credit account. This can be done through proper negotiation with your creditors and proving to them that you are in  a financial crisis. This option can damage your credit score because the whole process involves defaulting on your payments deliberately. However, that decrease will not be as significant as bankruptcy.

Check the reasons why you want to go through bankruptcy. If you just want to stop your creditors and collectors from harassing you, then you should read about the FDCPA or Fair Debt Collection Practices Act. It will educate you on how you should be treated and your rights as a debtor and consumer.

Apart from these alternatives, there are other debt relief options that you can utilize. Know what they are and find out the best program that can help relieve you of your credit problems. Go to National Debt Relief for more information.

Difference Between Bankruptcy and Debt Settlement

If you are looking for a debt relief program that will provide the most reduction on your debt, your options include debt settlement and bankruptcy. Both of them are effective in their own right. The thing about any type of debt relief program is you have to know our financial capabilities first before you opt for any of them. Believe it or not, there is a program for your unique situation.

Assuming that you want most of your debt forgiven, let us analyze bankruptcy and debt settlement so you can determine which one is best for your specific debt condition.

Bankruptcy is something that you file in a bankruptcy court. When your expenses is bigger than your income and you have nothing to pay for your debts, then this is an option that you can take. It used to be just Chapter 7 - wherein your debts are discharged after qualified assets are liquidated. Now, Chapter 13 is what scares a lot of debtors because it involves a repayment plan that the court will impose and make sure that you comply.

These two options implies that you can’t just file for bankruptcy now. You need to be eligible for it. The means test will help the courts determine which chapter you fall into. If your income is not lower than the median salary of the state where you filed, you will automatically be considered for Chapter 13 bankruptcy. But if you are proven to have lower financial capabilities and a salary that is below the median range of the state, then you may be eligible for Chapter 7.

Chapter 13 is the reason why debt settlement became a better option for some people. It may involve a higher repayment plan but the credit score effects will not be as severe.

Both of them will have drastic effects on your credit score but bankruptcy will give the most damage. The minimum effect of bankruptcy is estimated at 200 to 250. So if your score started at 600, that can go down immediately to 350. In debt settlement, it can be as low as 50 points.

Debt settlement involves a process wherein the debtor will negotiate with the creditor for a lower payment plan. It is usually a lower amount than the outstanding balance. The idea is, when you have paid for the agreed settlement amount, the rest of your debt will be forgiven.

Ultimately, you will know the right option if you know how much you are capable of paying for. If you wish to pursue bankruptcy, make sure you are ready for the repayment plan that may be imposed on you based on the requirements of Chapter 13.

If not, know that debt settlement can effectively get you out of debt. Whether you decide to work with a professional or not, National Debt Relief can assist you with any questions that you may have about this type of debt relief. Know if debt settlement is the answer to your credit problems here: http://www.nationaldebtrelief.com/debtsettlement/.