The struggle with debt sometimes takes a turn down a dead-end street and as a last resort bankruptcy must be considered. In years past, people often used bankruptcy as a way to make a ‘clean slate’. In essence, it was an ‘easy’ way out for people with too much financial burdens.
Now bankruptcy is a much more serious business and not always a guaranteed ‘fix’ because in many cases a bankruptcy may not even be possible. If it is, consumers must put forth a lot more time and effort to see the process through until the end. The consequences of filing for bankruptcy are also long-lasting. Bankruptcy remains on a credit report for 10 years and can be a huge red flag for creditors moving forward, making it difficult to get financing for a long period of time.
There are also some other things you really need to know about bankruptcy including some points a bankruptcy court may not clarify like:
Bankruptcy Is Not The Ultimate Fix
There are some types of debt burdens that even bankruptcy can not take care of for you. Financial responsibilities like child support, alimony, and student loans can not be eliminated. You must also go through a court process for bankruptcy where your debts are reviewed and there is no guarantee certain other debts will be allowed by the court to be included in the bankruptcy.
You Should Consider Legal Help
Bankruptcy law is a very complex process and bankruptcy laws vary from state to state. Many consumers assume they just file some paperwork on their own and viola! debts are erased. It certainly doesn’t work that way and if you are feeling overwhelmed considering bankruptcy, it is in your best interest to consult with an attorney specializing in bankruptcy laws.
Your Credit Score Is Not Dead in the Water
Bankruptcy will kill your credit score initially but it is not a lost cause. If you are on the verge of filing for bankruptcy than it is likely your credit score is already pretty low. The trick to getting back on track in the fastest time period possible is by applying for a new line of credit such as an auto loan or a new credit card. Be aware that the interest rates a consumer who has filed bankruptcy will pay is much higher than for those with good credit but it is a necessary step to boosting your credit score.
Never Hide Your Assets
When you are on the road to financial recovery, it can be tempting for a debtor to repay friends and relatives that lent money to them. If this repayment occurs within the first year of bankruptcy, the bankruptcy trustee can seek recovery through a lawsuit to recover the money. Even worse, if you try to hide the assets you have from the bankruptcy court, you can actually find yourself in jail for perjury and nearly guarantee your bankruptcy case will be thrown out. This will initiate your original creditors pursuing you for balances owed once again.
Bankruptcy is Certainly Not Free
It seems very Catch-22 but bankruptcy costs a lot of money. You can not just file for bankruptcy and expect everything to be taken care of in a few days without any effort. Not only is bankruptcy a time-intensive process, it is also an expensive one and you’ll need some cash reserves to get through the process. Lawyer fees, repayments, and court costs will all come in to play in a bankruptcy case and you may have to shell out a few thousand dollars to follow through with your case.
If you are considering bankruptcy, really think about all of your options and consult with an experienced attorney to ensure that you are pursuing the right option for your overall financial wellbeing.