If you were unfortunate enough to have your property repossessed by the tax man, you should probably consider bankruptcy. Your credibility with lenders will take a beating, but sometimes bankruptcy is the only thing you can do. The article below discusses some of the pros and cons of filing bankruptcy.
Filing for bankruptcy doesn’t always discharge 100% of the debts that you have. Although Chapter 7 bankruptcy is the most well known, there is another type of bankruptcy, called Chapter 13, that allows you to set up a payment plan to pay credits part of your outstanding debt. Some people are hesitant to file bankruptcy because they feel obligated to live up to the promises they have made to their creditors. This type of bankruptcy allows people to satisfy their creditors and find relief from a heavy load of debt.
After you have filed for personal bankruptcy, you should be quite cautious about agreeing to take on debts. You are likely to receive lots of offers for “fresh start” loans and credit cards pretty quickly after your bankruptcy is complete. Many times, these offers have increased increased interest rates. These types of offers can cause you to fall back into your old ways if you are not careful.
Don’t make the mistake of thinking that Chapter 7 bankruptcy is a magic debt eraser. Some debts require you to reaffirm them by signing a new repayment agreement, while some others are very rarely dischargeable at all. For instance, you could not discharge child support obligations, court-sanctioned fines or even alimony payments through chapter 7.
Don’t automatically assume that bankruptcy is your only option. A lawyer that specializes in bankruptcy law can help advise you of other options, such as repayment plans and reducing interest rates to relieve some of the burden. Loan modification plans can be helpful for those facing foreclosure. Sometimes your lender will work with you to help pay off your debt by giving you a lower interest rate, forgiving late fees, or extending the time period of your loan. After all is said and done, your creditors will still want their money. For this reason, you may wish to investigate debt repayment programs in lieu of bankruptcy programs.
The introduction to this article made it clear that filing for bankruptcy is always on the table if you are chest-deep in debt. However, it should not be anyone’s first choice because it does not reflect well on credit. Staying informed on how to manage this situation could prevent you from experiencing headaches and it can also help you keep your valuables.