Running Out of Money? 4 Things You Need to Know Before Filing for Bankruptcy
Tuesday, August 22, 2017, 6:00 PM | Leave Comment
Filing for bankruptcy may be an effective way to get out of debt.
However, it can also be an effective way to significantly lower your credit score and make it harder to apply for credit in the future.
What are some issues to consider before you make the decision to ask for protection from creditors?
-
Look for Alternatives to Bankruptcy
There are several alternatives to bankruptcy that you may want to consider before you file.
For instance, it may be possible to talk to creditors about flexible repayment terms that lower your monthly payments.
Other alternatives include asking for debt forgiveness or selling your home or car as opposed to having them repossessed or foreclosed.
-
Bankruptcy Doesn’t Eliminate All Debt
It may not be possible to eliminate all of your debt in bankruptcy. For instance, student loan balances or back child support will not go away until you actually pay what you owe.
State and federal income tax debt is also unlikely to go away in bankruptcy.
Finally, if you have secured debts such as auto or home loans, creditors can proceed with debt collection efforts after the bankruptcy period expires.
-
Bankruptcy Has a Long-Term Impact
While it may be possible to have some debts discharged days or weeks after declaring bankruptcy.
However, if you filed for Chapter 13 protection, you have to repay debts over a period of three or five years.
Also, the fact that you filed for bankruptcy will stay on your credit report for seven or 10 years depending on what type that you filed.
You should also know that you may be ineligible for a home loan or other types of credit for up to three years after your case ends.
-
Bankruptcy Doesn’t Change Spending Habits
Although filing for bankruptcy may make it easier to get out of debt quickly, it doesn’t prevent you from getting into future debt.
It may be best to talk with a credit counselor or a financial adviser about ways to alter your budget.
Developing better habits can lead to an increased credit score, which may make it easier to get a house or keep a job.
If you don’t think that you have enough money to pay your bills, bankruptcy may be an option. However, it is important to know that there are other ways to fix your financial situation such as increasing your income or cutting expenses. Talking with your creditors may also lead to a solution that helps you avoid bankruptcy.
Throw us a like at Facebook.com/doable.finance
