People who are in debt usually want the quickest way out of it. When we are talking about the fastest way to solve your debt problems, we usually think about bankruptcy. While it can get you out of debt, bankruptcy will not really solve your problems. You may find your debts discharged, but you are far from the financial freedom that should be associated with the elimination of your credit obligations.
One of the most prominent (and well advertised) bankruptcy disadvantage is its effect on your credit score. Your score will immediately go down 200 points or more. Not only that, the stigma of bankruptcy will stay in your report for the next 10 years. If you had plans of applying for loan to buy your own home or start up a business, you can say goodbye to that. No lender will come near you to provide you with that financial assistance. If you do find one who will entertain your application, they will most likely give you a high interest rate. Your bankruptcy history will make you a high risk borrower and that results in a higher than the usual interest.
Another effect of bankruptcy is you will not learn your lesson. While paying off your debts the traditional way is hard, you get to learn important financial management habits along the way. If your debts are discharged, you don’t get to feel the full impact of your debt responsibility. The chances of you getting back in debt is possible.
When you file for bankruptcy, you are also endangering your personal assets. You can end up with a Chapter 7 or a Chapter 13 bankruptcy. With the former, your debts are discharged but if you have valuable assets, the court may request to have them liquidated. If you land on a Chapter 13 bankruptcy, your debts will not be discharged and you will be asked to pay off a portion of your debts through a repayment plan. In this case, you still need to pay your debts and end up with the same credit damage.
These are only some of the things that you need to know about bankruptcy. Your financial future will suffer greatly if you file for it. There are debt relief alternatives that can work on your current financial capabilities without the destructive effect on your reputation - at least in the financial world.
First option involves growing your income or lowering your expenses so you can increase your debt payment fund. Check your minimum payments and see how much is lacking to cover your debts. Use that as your goal and come up with a plan to reach it. Most of the time, people combine lowering expenses and increasing their income to help grow this fund.
If it proves to be a futile effort, choose among debt relief options that will allow lower monthly payments. You can enrol in a debt management program that will stretch your payments to lead to lower payments. You can opt for debt settlement that will involve negotiating with your creditors to agree to a settlement amount. When this amount is paid off, the rest of the debt is forgiven.
All of these bankruptcy alternatives may be better but you need to study your finances carefully because there are cases wherein bankruptcy is the only option. Consult a debt expert if you can. You may find their expertise helpful in shedding light to your debt woes.
One of the most prominent (and well advertised) bankruptcy disadvantage is its effect on your credit score. Your score will immediately go down 200 points or more. Not only that, the stigma of bankruptcy will stay in your report for the next 10 years. If you had plans of applying for loan to buy your own home or start up a business, you can say goodbye to that. No lender will come near you to provide you with that financial assistance. If you do find one who will entertain your application, they will most likely give you a high interest rate. Your bankruptcy history will make you a high risk borrower and that results in a higher than the usual interest.
Another effect of bankruptcy is you will not learn your lesson. While paying off your debts the traditional way is hard, you get to learn important financial management habits along the way. If your debts are discharged, you don’t get to feel the full impact of your debt responsibility. The chances of you getting back in debt is possible.
When you file for bankruptcy, you are also endangering your personal assets. You can end up with a Chapter 7 or a Chapter 13 bankruptcy. With the former, your debts are discharged but if you have valuable assets, the court may request to have them liquidated. If you land on a Chapter 13 bankruptcy, your debts will not be discharged and you will be asked to pay off a portion of your debts through a repayment plan. In this case, you still need to pay your debts and end up with the same credit damage.
These are only some of the things that you need to know about bankruptcy. Your financial future will suffer greatly if you file for it. There are debt relief alternatives that can work on your current financial capabilities without the destructive effect on your reputation - at least in the financial world.
First option involves growing your income or lowering your expenses so you can increase your debt payment fund. Check your minimum payments and see how much is lacking to cover your debts. Use that as your goal and come up with a plan to reach it. Most of the time, people combine lowering expenses and increasing their income to help grow this fund.
If it proves to be a futile effort, choose among debt relief options that will allow lower monthly payments. You can enrol in a debt management program that will stretch your payments to lead to lower payments. You can opt for debt settlement that will involve negotiating with your creditors to agree to a settlement amount. When this amount is paid off, the rest of the debt is forgiven.
All of these bankruptcy alternatives may be better but you need to study your finances carefully because there are cases wherein bankruptcy is the only option. Consult a debt expert if you can. You may find their expertise helpful in shedding light to your debt woes.
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