Why Avoid Bankruptcy

Bankruptcy can be seen as a way to have a new start, but this is not always the case for some people. People may believe that bankruptcy is a plan to crawl out from under a sea of bills, but there are times when the bankruptcy will end up causing more harm than good.

1. Credit Scores Suffer: A bankruptcy remains on a person's credit reports for at least seven years, but it may be there for up to 10 years. In this amount of time, anyone who needs to research someone's credit history will be aware that there is a bankruptcy in this person's past. This fact will make it extremely difficult for this person to borrow money. Furthermore, a bankruptcy slashes a person's credit by 200-250 points.

2. Property Will Be Sold: In order to discharge debts in some states, people filing for Chapter 7 bankruptcy can be forced to sell their houses and their vehicles to pay their creditors.

3. Some Debts Will Remain: Student loans, child support, spousal support and tax bills are debts that cannot be dismissed with a bankruptcy.

4. Property Can Be Repossessed: Any creditors whose assets were not dismissed through the bankruptcy may take back the property one month after the bankruptcy hearing has ended. If the debtor has not been making payments on this property and the creditor has placed a lien on it, they are entitled to sue for it.

5. Bankruptcy Affects Other Areas of the Debtor's Life: One area that can be affected is a person's job. People who need a security clearance have the obligation to inform their employers that they have filed for bankruptcy. This fact may reflect badly on those people.

6. Bankruptcy Prevents the Filer from Receiving Credit: People with a bankruptcy on their credit reports will find it extremely difficult to qualify for mortgages and credit cards. As a matter of fact, it may require that up to four years pass before these people will be trusted with a loan again.

7. Retirement Plans Are at Risk: A person's retirement funds including those in Social Security, the 401(k), the IRA, pensions and others may be required to help pay creditors in a Chapter 7 bankruptcy.

If these seven truths about bankruptcy lead anyone to want to avoid it, they have several options for doing so. They can engage in debt settlement, debt consolidation, debt management services, consolidate their payday loans or put themselves on a strict budget. Negotiating with creditors is the way to help people pay an amount they can comfortably afford.