It is not hard to imagine why so many people consider bankruptcy as their first option when they find themselves in deep financial trouble. Harassing phone calls, and threatening letters can cause a great deal of stress. Add in threats of repossessions and wage garnishments, and some may think there is no way out except for filing for bankruptcy.
It is indeed the worst phase of life when you fall prey to bankruptcy and you have only yourself to blame for when your credit history has been tarnished and it should come as no surprise that your creditors should start hounding you when you fail to repay all the loans you have ever taken. The bankruptcy San Diego lawyers are of the opinion that theirs is the hardest job of all as they are constantly on the hunt for financial defaulters who take loans from bank for and end up biting off more than they can chew as there are numerous instances of such people taking all the money and running away.
Before making any rash decisions, you should consider some of the very real reasons that you should avoid filing for bankruptcy.
Your Credit Score
You likely already realize that filing for bankruptcy will kill your credit score. You may even be thinking what does it matter, since not being able to pay my bills is doing the same thing. There is a difference. Bankruptcy can remain on your credit for up to ten years. That’s right, a full decade. During this time you will likely not be able to purchase a home, buy a car, get a credit card, or take out a personal loan. All of these things you may wish to do during a decade, and will not be able to.
Getting A Job
Most people do not realize that it is legal for potential employers to check your credit score. Not only can they check it, they can turn you down for a job if it is poor. There is much debate as to if this should be legal, but for the time being, it is. You may also be asked upfront on a job application if you have ever filed for bankruptcy. This is a no win situation. If you say yes, you likely will not get the job. If you lie, and say no, you will meet the same result once it is found out that you have indeed filed for bankruptcy in the past.
Chapter 13
If you do file for bankruptcy, and the court decides that you are in a position to repay your debts, you will be transferred into a Chapter 13 bankruptcy instead. When this happens, money will be taken from your paycheck, and given to the court. The court will then use this money to pay your creditors what they are owed. The payments to the creditors are typically small, and this process can take as long as five years to complete.
Your credit score will not only be horrible during this five year period, but will continue to be so long after the Chapter 13 case is dismissed. In many ways, this is way worse than traditional bankruptcy.
Bankruptcy Alternatives
If you own a home, you may want to consider refinancing, or taking out a home equity loan. Neither of these require you to have excellent credit, as your home serves as collateral for both. Before making this move, you should be certain that you will be able to pay the payments. If you do not, you could very well lose your home.
Another alternative would be a debt consolidation loan, or working with a debt settlement company. This industry has received quite a bad reputation over the past few years. However, if you take the time to find reputable companies within this sector, there should be no problems.
Filing for bankruptcy is serious business, and should be avoided if possible. This move should be reserved for when you have absolutely exhausted all of your options. If you decide to go ahead and file, at least become as educated as possible to what this will mean for your immediate, as well as your distant future.
