Making the choice to file for bankruptcy is a big decision and should not be taken lightly. It’s important to know the negative aspects of your decision.
A bankruptcy will stay on your credit report for ten years.
This makes it hard to get loans to buy a home or a car. If you do get credit it will be at a higher interest rate.
Even landlords now check your credit report so renting can be harder with a bankruptcy.
One of the harshest aspects of bankruptcy is that future employers check credit reports. Though they’re not legally supposed to refuse to hire due to a bankruptcy, they can always find another reason. This especially happens in jobs that require access to money, such as cashiers or bookkeeping type jobs.
So When Do the Pros Outweigh the Cons?
When there is no way to dig out of your financial problems.
This is often caused by huge medical bills or a job loss. Even a family with two incomes can quickly get in trouble if one income is lost.
Most people live paycheck to paycheck with very little in savings. And even a decent amount of savings often can’t cover medical bills of thousands of dollars or a job loss of a year or more.
What Should You Do If You’re Considering Bankruptcy?
Most lawyers will not charge you for a consultation. They can tell you the difference between a Chapter 13 repayment plan and a Chapter 7. There are certain requirements you must meet to file a Chapter 7 and they vary from state to state. A lawyer can tell you if you’re even eligible.
They’ll also tell you what their fees will be to file your bankruptcy. These start at around $1,500 and go up from there, depending on your particular case and your geographic region. Some lawyers will accept a down payment and then set up a payment plan.
Remember that a bankruptcy lawyer makes his living by filing bankruptcies. So his opinion is not objective. But he can explain the process and the fees.
Can You File Your Own Bankruptcy?
There are online options that allow you to file your bankruptcy on your own. In this case you’ll pay only the filing fees and no lawyer fees. This option can save you hundreds of dollars.
However, the paperwork can be extensive and it must be done correctly. If you forget to list a creditor you cannot go back and add them.
When the paperwork is not done correctly your case can be thrown out by the court and you’ll need to start over.
Some services will do the paperwork for you for a set fee. They cannot give you legal advice but they can help with the paperwork. Their costs will be much lower than hiring a lawyer.
The laws vary from state to state so you’ll need to become familiar with your own state laws if you choose not to use a lawyer.
Will I Lose My Home?
In some places you can keep your home and vehicle if you continue to make the payments. In fact, in some states you are not allowed to place your home in bankruptcy. You can also keep the tools of your trade. Again, you’ll need to check out local laws to know for sure.
Remember that student loans are not forgiven in a bankruptcy.
File Bankruptcy Only As A Last Resort
Bankruptcy should always be the last choice to deal with your financial problems.
It’s always better if you can avoid this course of action by drastically cutting your expenses or getting extra work.
You may be able to work with a credit counseling agency. But be sure they are legitimate. Read all the reviews of their services.
However, There Are Times When Bankruptcy Simply Can’t Be Avoided
If you’re endanger of losing your home to foreclosure or your wages are being garnished, or bill collectors are harassing you daily, that is a good time to check into bankruptcy options.
Once you file bankruptcy you can give your creditors your lawyer’s phone number and they aren’t allowed to call you anymore. This can be a huge stress reliever and maybe even save you from future health problems.
If a Company You Owe Money to is Threatening a Lawsuit
Be careful if you’re filing bankruptcy due to medical bills caused by a problem such as cancer. Be sure you’ve received the treatment you need before you file. A doctor will probably not see you again after his fees have been discharged in a bankruptcy.
Filling a bankruptcy can be a huge and necessary relief for many people. But make sure you do your due diligence before making your decision.
