When your debts are too much for you to handle on your own, exploring all the options available to you can be well worth the effort. Although you might think of filing bankruptcy as a process to be avoided at all costs, there are instances when it can be the solution that works best for you. There are drawbacks to filing for bankruptcy, such as the fact that it appears on your credit history for years afterward. But, if you’ve considered all other options and nothing else has helped, filing bankruptcy might be the option that helps you get your life back on track.
Gives You a (Mostly) Clean Slate
In most cases, individuals who file for bankruptcy in the US file for either Chapter 7 or Chapter 13. The benefit of either option is that they eliminate the stress of having to repay substantial amounts of debt. Under Chapter 7, your debt is liquidated, meaning you don’t have to repay it, although you may have to sell certain assets to give some creditors something. Under Chapter 13, your debt is reorganized, meaning your creditors agree to a new payment plan with you. While many types of debt can be discharged under either type of bankruptcy, there are some that won’t be, such as student loan debt, unpaid child support or alimony.
Gets You Help
Before filing bankruptcy, you might feel as though you are floundering, unable to figure out a way to back your debts or unable to figure out a way to make sense of your financial circumstances. Getting help is part of the bankruptcy process, as filers need to undergo pre-filing credit counseling, as well as a post-filing debtor education course. A credit counselor will examine your specific situation, before you file, and give you a clear sense of your options. It might be that bankruptcy will serve you best, or it might be that you’d benefit more from a debt management program or another option.
The debt education course can help give you the tools you need to rebuild your financial life after you file. The course will often cover ways to make a budget, how to use credit carefully, how to manage your money and can provide assistance and guidance for rebuilding your credit after bankruptcy.
Lets You Rebuild Credit
The idea that bankruptcy can help you to rebuild credit might seem far out. After all, the bankruptcy can remain on your credit report for up to 10 years. While it does ding your score and can make lenders wary of extending credit to you, at least for some time, bankruptcy doesn’t continually bring down your credit score, the way that falling behind on a number of debts or continuing to miss payments would.
About half of the people who filed bankruptcy were able to obtain lines of credit again within five years of filing, according to the American Bar Association. You might have to pay higher interest rates or have less favorable terms after you file for bankruptcy than a person with excellent credit, but you are also more likely to get credit if you do something about your debt issues, than if you don’t.
Restores Peace to Your Home Life
One final way that bankruptcy can help you get your life back on track is that it can create a more peaceful home. If you and your partner continually argued about debts and money, a bankruptcy can help you both get on the same page and can help you work together to restore your financial life.
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Consumer Education Services, Inc. (CESI) is a non-profit service provider of comprehensive personal financial education and solutions for all life stages and for all of life’s milestones. Our goal is enhanced economic security for everyone we serve.
CESI is NOT A LOAN COMPANY