If you’ve found yourself facing severe financial problems, you might be considering filing for bankruptcy as a way to take care of your debt.
It’s important to remember that the process of filing for bankruptcy isn’t an easy one, and that it should be used only as a last resort… after all, the effects of a bankruptcy filing can take several years to pass completely. Below you’ll find some information on exactly what bankruptcy is and what it isn’t, as well as some alternatives to bankruptcy, so as to assist you in making the difficult decision as to whether or not you should declare a bankruptcy.
What Bankruptcy Is
Bankruptcy is a legal filing, making an official statement that you are unable to repay your outstanding debts and asking the court system to intercede on your behalf. The bankruptcy laws vary from country to country, but they are similar in that the court will generally appoint a mediator to create a repayment schedule for some of your debts and erase or reduce others.
Payments are generally then made to the court, often in the form of wages that are withheld from your salary or paycheque, and continue to be made until the agreed upon amount has been repaid in full and the bankruptcy is discharged.
What Bankruptcy Isn’t
Contrary to what many people believe, bankruptcy isn’t a simple means of erasing your debts and starting over. While some debts will be negated by the court, many of those that you claim in you filing will still need to be repaid… and the court will see to it that they are repaid per the schedule that was created by the mediator. There are also additional fees that must be paid when filing for a bankruptcy… attorney’s fees, court costs, and other fines that are imposed to help prevent the bankruptcy system from being abused.
Bankruptcy can be quite expensive, and it can be nearly impossible (and in some cases restricted by law) to get any sort of credit or financial account until well after the bankruptcy has been discharged… which may take up to seven years.
Looking for Alternatives to Bankruptcy
A variety of alternatives to bankruptcy exist, though they may vary depending upon your location and your financial situation. Common bankruptcy alternatives include debt consolidation loans, in which a sum of money is borrowed and used to repay older debts that have become overwhelming (and leaving the borrower with only a single monthly payment as opposed to multiple payments), or credit counseling, in which a third-party agency negotiates settlements with some of your debtors and assists you in creating a budget so as to repay what you owe.
Other alternatives also exist, though you should always exercise caution when considering them… if any service claims that they can instantly repair your credit score or payment history, you may not only be looking at a scam but also at activities that can get you into legal trouble as well.
When Bankruptcy Is Best
Bankruptcy exists so as to help those individuals who have no other options. If you find yourself in a situation where you can find no other alternative and are on the verge of losing everything that you have, you might want to consider looking into a bankruptcy filing.
Consult an attorney in your area and see what advice they can offer you, and learn what your options might be to help protect some of your property and take care of your problems once and for all.