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The Pros and Cons of Bankruptcy

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Many people have found themselves in financial situations that can sometimes seem hopeless. There are many different options to those people that a want to remove their debt. However, sometimes the only option is filing for bankruptcy.There are so many pros and cons to bankruptcy that one can look at before making a final decision.

Pros and Cons of Bankruptcy

Bankruptcy can change your life forever, it cannot only harm your credit, but it could be the short solution to improving an individual’s life. Bankruptcy might be the solution to help you not lose your larger assets, like you car or home. Since filing for bankruptcy is such a long-lasting and permanent decision it is important to examine all the pros and cons of bankruptcy. After knowing the facts then you will be able to decide it, bankruptcy is the best option for your situation.

Credit Cards and Creditors

One thing that most everyone knows is that you will no longer have all your credit cards, unless you have already paid them off prior to filing for bankruptcy. This can be a big con to many people, as well as the waiting process that you have to go through before you can get any credit in the future.

For many people it is a pro that during the process all of your accounts in collections will be frozen. No further action will be taken on you from your creditors. This is beneficial to those going through foreclosures, repossessions, negative phone calls, as well as any garnishments that you maybe going through. In addition, using a lawyer can help shelter you have dealing with many of the questions that creditors will have.

Future Outlook

Some of the reasons that one should really look at all the pros and cons of bankruptcy is because many of the consequences will happen in the future.

For example, it will be nearly impossible for an individual to receive a mortgage until you are at least five years out from judgment. It is also important to note that the bankruptcy will remain on your credit report for at least 10 years. Just as getting a mortgage is difficult, it can make it hard for you to gain credit, life insurance, or get a job.

However, for both these options there is a positive. Each type of bankruptcy that you file has exemptions that can allow you to keep some of your major assets like a home or car. This can stop you from having to worry about getting another loan or wind up without a home.

Which Debts

There are both pros and cons with bankruptcy and the debts that you have. However, there are only certain debts that can be erased by filing bankruptcy.

Not all debts can be removed during the bankruptcy process. Two of the major debts that an individual cannot be release are student loans and back taxes due.

Even though you cannot have your student loans discharged, all the lenders will no longer be able to call with harassing messages. You will be able to begin rebuilding your credit score as soon as your bankruptcy has been completed.

Personal Benefits

Bankruptcy can be looked as a sign of admission, defeat, or embarrassment. Your name will be in court records as well as it can appear in newspapers, this can be considered embarrassing to many people. You will have to tell your story to a judge regarding your entire financial situation. It is important however, to remember that most judges have heard stories that are worst than your personal situations.

It can be complicated if you are sued rather than filing for bankruptcy. If you are sued by your lenders then your car can be repossessed or your home can be foreclosed on.

Tips

There are several things you might want to remember before making a decision.

  • Filing for bankruptcy can release you from the need to handle your creditors and their phone calls.
  • You will be able to avoid any lawsuits by filing for bankruptcy. You will also have your foreclosures paused, you can no longer be sued after you file your bankruptcy position.
  • Bankruptcy can harm you are the ability gain no credit, insurance, as well as a jobs. You will also have trouble getting any mortgage for between 7 and 10 years after your bankruptcy is complete.

There are so many reasons that a person can find themselves in financial troubles. It is true that the cost of living is rising, the unemployment is rising, and poverty is rising. If you are facing insurmountable debt troubles then filing for bankruptcy may be your only way option. It can be very stressful for anyone involved in the negative financial situation. Knowing the pros and cons of bankruptcy can help a person decide if it is the best option for you.

Facts and Truth about Credit Counseling

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Have been worried about your debt? You are unable to pay off your liabilities and nightmares haunt you. We would like to tell you that no matter how badly you are covered up in debt, there remains hope. You always have options to deal with your crises. Now the question is which option to select. We will advise you make the right choice that suits best in your situation.

Truth about Credit Counseling

Following are the most common solutions people go for:

We shall focus on credit counseling today. Before you sign up for it, you should be aware of the following facts.

Introduction to Credit Counseling?

A credit counseling agency helps you to develop a plan. This is specifically known as a DMP or debt management plan.

Credit counseling agencies are non-profit agencies but be aware that it not necessary that they don’t charge you any fee. Their services may not be free always.

They help you develop a fair plan and they try to help you out by talking to your lenders to reduce the interest rates. They try to convince and negotiate better terms with your creditors. If you properly go according to the DMP, it’s quite possible that you recover from your debt crises in around five years.

Truth about Credit Counseling: Poor Success Rate

Sad news for people considering credit counseling: these debt management plans have a success rate of only 20% to 26%. This means only one out of five people actually complete their debt management plan.

Another noticeable thing is that mostly the people who have a reasonable amount of disposable income left at the end of each month are successful in getting out of debt through a DMP. This information is provided by the National Foundation for Credit Counseling themselves. A reason to this has been that the people started believing they can complete the plan themselves instead of continuing with a counseling agency.

Reasons for Poor Success Rate

There is no single and fixed reason why people generally fail to complete their debt management plans. The truth about credit counseling is that lenders offer only a limited amount of concessions during negotiations to the customers who go for credit counseling.

In easier words you can say that when people sign up for a debt management plan through credit counseling, they see that it cannot lower the debts to a significant amount, they are most likely to leave the 3 to 5 year plan.

What Does Credit Counseling Actually Offers You?

Such a lower success rate implies that credit counseling is useful for only few customers. This is because it all depends on the creditors. The debtor cannot call the shots. It’s the creditor who decides what concessions to offer. It is very rare that lenders will reduce your principle amount. We can categorize the offers by DMP into three parts:

  1. The counseling agencies are able to “re-age” their accounts
  2. They are able to lower the interest rates
  3. Late fee penalties can be eliminated or at least reduced.

Successful DMP Requires Discipline

A significant truth about credit counseling is that it requires the customer to have a fair amount of discipline. People get eager for results and they normally quit the program when there is no instant outcome.

A debt management plan wants you to quit using credit cards or take more debt until they complete their plan that is normally five years. Some people just don’t have discipline to handle such a program. They start taking more debt and can no longer make payment to their counseling agency and as a result they quit the program. This is a hard truth about credit counseling!

Other Options You Can Consider

Other options, as we mentioned earlier, are debt consolidation loans and chapter 7 bankruptcies. Both of them have better rates of completion especially the secured debt consolidation loans. The reason behind this is that these loans are secured by a valuable asset such as a house, property or a car.

Chapter 7 bankruptcy is also successful because there is no other alternative. Through bankruptcy, you can clear all your debts and keep safe your most essential assets.

The ugly truth about credit counseling makes you notice that debt settlement is a better alternative because it actually gets your debts reduced and people want results. Additionally, debt settlement consolidates your debts and it makes it easy for you to handle a single payment instead of multiple payments. Normally it take up to 2 to 3 years to clear your debts depending on the amount of debt. Learning about the truth of credit counseling, you must see why this is so.

Make your choice keeping in mind all factors so that you are able to manage your debt.