For many people, filing bankruptcy seems like an easy way out. Yet, it should be a last resort. It is the worst thing you can do to your credit and it remains on your credit report for up to ten years from the day you file. Lenders will strongly consider previous bankruptcies when they evaluate you for any type of loan. Some may extend credit only after a number of years have passed. Obtaining loan after you have filed bankruptcy is difficult and will almost certainly cost you more in interest rates and fees. Worse yet, you may only be able to get a secured loan.

The first step in the bankruptcy process is to file a petition in court. A debtor files a statement of assets and liabilities and a schedule listing all of the creditors. Once you have filed, your creditors are prohibited by law from taking any action to collect discharged debts. If a creditor listed in a schedule does attempt collection efforts, you should inform the creditor that you have filed for bankruptcy and request that they cease collection efforts.

There are many negatives with filing bankruptcy. One problem with chapter 13 is that you may actually end up repaying 50% or more of your debts. Under bankruptcy law, if you miss a payment you could even end up in breach of court and be forced to repay the entire debt. The law also limits your personal spending to items considered essential. Unfortunately, the majority of debtors do not complete their Chapter 13 repayment plans. While most people filing chapter 13 bankruptcy assume they'll complete the plan, in actuality, only about one third do. In a Chapter 7, you pay nothing to your creditors. However, as a result, it may be more damaging to your credit than a Chapter 13 and can remain on your credit for a longer period. If you own a home with significant equity, have assets you want to protect, or have co-signers to a loan, you should not file chapter 7. If you do, it will endanger your home or assets or damage the credit of your co-signer.

As you can see from the information presented, bankruptcy should clearly be avoided if possible. With more difficult forthcoming laws and inherent credit damage it causes, filing should truly be a last resort. Our expert debt consultants can potentially reduce your debts by 40-60% so you will not have to file. For a no cost, no obligation consultation, fill out the free consultation on our website or call us toll-free at (888) 331-DEBT or (888) 331-3328.