Filing for bankruptcy is a simple process. And if you listen to many early morning infomercials on television, this is likely what you should do. However, while filing for bankruptcy can eliminate many of your debts, it is not a panacea. Additionally, there are numerous complications. Therefore, you should consider these objections prior to filing.
The prevalent belief is that once you declare bankruptcy, your financial problems will be resolved. You have the opportunity to start over with a new slate, free of your previous financial obligations. And to some extent, that is accurate.
There is, however, one issue. There are essentially two types of personal bankruptcy that you can apply for. The seventh and eleventh chapters. Now, the majority of individuals are unaware of the distinction. And when they consider bankruptcy, Chapter 7 typically comes to mind.
With the 2005 passage of a new bankruptcy law, however, more individuals are discovering that they are only eligible for Chapter 11. And the contrast between the two is striking.
The majority of your debts will not be discharged under Chapter 11. You will instead be placed on a modified payment plan where you will be required to repay your creditors. And even if you were eligible to file under Chapter 7, if you owe child support or alimony, you would discover that these and other debts cannot be discharged.
The second disadvantage of declaring bankruptcy is the effect it has on your credit score. Specifically, the fact that you have filed bankruptcy will be reflected on your credit report. This can impact you in several significant ways.
One is that certain positions require you to consent to a credit check. When they discover that you have declared bankruptcy, you become a less desirable candidate. In addition, many apartment building owners will be hesitant to rent to someone who has filed for bankruptcy when you register for an apartment.
And ultimately, your credit score will immediately begin to decline. You will discover that you are eligible for credit at fewer institutions. And the locations where you do qualify will likely charge a higher interest rate for the privilege of lending to you.
Therefore, prior to filing bankruptcy, you should consult with a reputable financial advisor to determine if it is, in the long run, your best option.""
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