Bankruptcy May Not Be The Best Choice

With consumer debt at an all time high, owing a debt can seem very overwhelming. A lot of people have looked into the internet and have seen advertisements claiming debt relief as a quick fix. Alluring as these ads may seem, it is important to be on the lookout for the validity of the claim.

Many of these promise a quick fix, but that quick fix may be bankruptcy. Yes, bankruptcy is one way to address your financial issues, but in most cases it should be a last resort. The fact that you claim bankruptcy stays on your credit report for ten years which means that your chances of getting credit, jobs, a place to live or insurance are significantly lowered.

It’s always a good idea to consider other options before deciding to file for bankruptcy. Talk with your creditors. Many times a re-payment plan can be worked out that is modified or can be paid in installments. Credit counseling services can work with you and your creditors to make debt repayment plans.

If you are considering a second mortgage, be careful. These loans require your house as collateral. Bankruptcy can stop foreclosures, debt collection activities and it may get rid of unsecured debts. Exemptions are provided that let you keep certain assets. However, personal bankruptcy does not usually eliminate child support, fines, taxes, alimony and in some cases student loans.

Claiming bankruptcy usually will not let you keep your property if your creditor has a security lien or mortgage that has not been satisfied. A relatively new change in bankruptcy laws creates certain tasks that you must complete before you can even file for bankruptcy, no matter what type of bankruptcy. First, you need to get credit counseling from an organization approved by the government within six months before filling.

Also in certain cases you have to pass a test that requires that you confirm that your income doesn’t exceed a certain amount.

Mallory Megan works for a debt collection agency. She also composes stories on business, finance, consumer spending and collection agencies.

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