Literally thousands of Americans are filing for bankruptcy. I recently saw that nearly 323,000 people filed for chapter 7 bankruptcies just in the first quarter of this year alone. That means more than 26,000 people filed each week.
It can be tempting
It can be tempting to file for bankruptcy as it’s the only known way to get rid of most of your unsecured debts in six months or less. A bankruptcy will discharge your credit card debts, medical bills, personal lines of credit and personal loans. However, you cannot use a chapter 7 bankruptcy to discharge student loan debts, past due taxes and child support or alimony and some other miscellaneous types of debts.
The world will know
Chapter 7 bankruptcies are public records. This means anyone could access the details of your bankruptcy, plus the fact that it will show up in your credit report. You may find it difficult to get a new job because some employers won’t hire people who have a bankruptcy in their history. For that matter, you might have trouble just renting an apartment – for the same reason.
What you can keep
One of the myths of declaring bankruptcy is that you would lose everything you own. This is simply not true. While bankruptcy laws are different in different states, there are always exceptions that will protect certain of your assets. This includes the equity in your house, your car, the money you have in qualified retirement plans, your clothes and household goods. For example, in some states you would be allowed to keep the equity in your home if you have $15,000 or less. You may also be able to keep multiple cars depending on the amount you owe and the value of the cars. If you have a car worth $6000 and you owe $4000, you have $2000 in equity. If you file for a chapter 7 bankruptcy you could probably protect $3000 of equity.
The bankruptcy judge or referee could seize other of your assets to help pay your creditors but in most cases you will be able to keep everything you have. Of course, you will have to continue to make payments on that car loan or mortgage.
You won’t be able to get new credit
Another of bankruptcy’s myths is that you won’t be able to get any credit for up to 10 years. As the French would say, au contraire. In fact, you’ll probably start getting credit offers almost immediately. However, these will be from subprime lenders or very high-interest credit cards. You may also be able to get an auto loan if necessary. However, it will be several years before you can expect to get a new mortgage or an auto loan that has a good interest rate.
Why debt settlement is better
We think that debt settlement is a better solution than filing for bankruptcy because it will not have as serious an impact on your credit score as a bankruptcy, plus it’s a way to do the right thing – which is not stiff your creditors. Our debt counselors could negotiate settlements with your creditors that would save you thousands of dollars and have you debt free in 24 to 48 months. Once we have settled your debts, you will longer have to pay your creditors either. Instead, you will send us one payment a month, which we will use to pay off your debts per the settlements we negotiate with your lenders.
Don’t let a bankruptcy put a blot on your credit record that would last as long as 10 years. Call our toll-free number or fill in a form you will find on this page and let us explain how debt settlement could help you become debt free.
