Is Bankruptcy My Best Bet?

Seeing as debt at an all time high, owing a debt could seem overwhelming. Many people have looked to the internet for an answer and without a doubt they have seen advertisements claiming debt relief as a quick fix. Engaging as these ads may appear to be, it is crucial to be on the lookout for the validity of the claim.

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

It is always a good idea to think about other options before making the decision to file for bankruptcy. Speak 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.

When you consider a second mortgage, be careful. These loans will need your home as collateral. Bankruptcy can put an end to foreclosures, debt collection activities and it may rid you of unsecured debts. Exemptions are provided that let you keep certain assets. But, personal bankruptcy does not usually take away child support, fines, taxes, alimony and in a few cases student loans.

It will not usually let you keep your property if your creditor has a security lien or mortgage that has not been paid yet. A somewhat recent tweak in bankruptcy laws creates certain hurdles that you must overcome before you can even file for bankruptcy, no matter what type of bankruptcy. First, you must get credit counseling from an organization approved by the government within six months before filling. Additionally, in certain cases you have to pass a test that requires that you confirm that your income doesn’t exceed a certain amount.

Mallory McGuinness is employed by a debt collection agency. She also composes stories on business, finance, consumer spending and collection agencies.