Bankruptcy is an interesting topic. The truth is that no one ever wants to file bankruptcy. After all, doing so will cause major harm to a credit portfolio. However, if you're dug in too deep, it may be an impossible to avoid reality. So, should you even try to avoid it? Well, that depends on how far in you are. Today, we'll talk about the idea...
What The Law Requires
First and foremost, it's important to keep in mind that under Federal law, you can't just file bankruptcy. At some point, you have to seek some sort of credit counseling service. So, if you haven't done so already, that's where you're going to want to start.
The Most Important Thing To Figure Out If You've Already Took A Shot At Credit Counseling Once
The truth is that in this situation, you're trying to do what you can to protect your credit. If you have good credit, life becomes a whole lot easier, and we all know that bankruptcy will tarnish that. While most people considering bankruptcy often think about how bad their credit will be, they generally don't know what their credit score is right now.
The truth is that if you're considering bankruptcy, chances are that you've already done the damage to your credit. You've tried to make your payments on time, but often came up short and were forced to send it late payments. As a result, your credit score has fallen. So, if you're thinking about bankruptcy, don't want to do it because of your credit score, make sure that you know what your credit score is and what you're really protecting.
Understanding The Damning Effects Of Bad Debt
The truth is that it's possible to recover from bankruptcy in as little as 3 years. I know because I have family members that have done so. However, if you have bad debt on your credit report, the debt can keep your score down for far longer.
There are several factors that make up your credit score. One of those factors is debt to income ratio. If you have far more debt than you do income, it's going to take a very long time to pay off your debt. During this time, you'll have to deal with less than perfect credit. In many cases, this period of time is far longer than the 3 to 7 years it may take to recover from a bankruptcy.
Answering The Big Question Here
So, going back to the beginning of the article, the big question here is should you even try to avoid filing bankruptcy? To answer the question, simply follow these steps...
- Seek Credit Counseling - If you haven't done this, you are going to have to do it at some point.
- Check Your Credit – As mentioned above, most people that try to avoid bankruptcy do so for credit reasons. However, if you're in need of bankruptcy, your credit is probably already damaged. So, check your credit and make sure that you know what you're working so hard to protect.
- Gauge The Affect Of Your Debt – Knowing that bankruptcy will take 3 to 7 years to recover from, take a look at your debts. Do you realistically believe that you will be able to get your debts under control over this period of time? If not, chances are that bankruptcy is your best option.
Bankruptcy is a hard decision to make. However, at the end of the day, filing for bankruptcy isn't as bad as you may think The truth is that it doesn't come with the stigma that it did 30 years ago. No one will treat you any different. When making this decision, simply think about what's best for your overall financial stability! If bankruptcy is the answer, set your pride aside and call a bankruptcy attorney!
[Image Courtesy of Pixabay]