What you should know about declaring bankruptcy. Let’s cut to the chase. Here’s the deal on bankruptcy:

Bankruptcy is used when all other possible options have been exhausted.

The reasons for this are many, but the biggest reason to keep it last is that it can stay as a negative mark on your credit report for up to 10 years.

With the new The Bankruptcy Abuse Prevention and Consumer Protection Act, it’s now tougher than ever to come out ahead after declaring bankruptcy.

Here’s a few more reasons to avoid bankruptcy:

• Your interest rates will be higher and you will appear to be bigger risk to most lenders.
• anyone can find out about your bankruptcy, because it is part of the public record.

However, maybe you are at the end of your financial rope and you are looking for a solution, consider carefully the information on this page.

A Quick Overview of Bankruptcy

Bankruptcy is a method used to stop all creditors from being able to collect what you owe them.  Court papers are filed by the debtor and the creditors and a judge will decide whether you are “bankrupt” or not.  After you are considered bankrupt by the judge, you are declared free of your debt.

Depending on your filing method (chapter 7 or 13, described below), you lose most of your possessions to the court, who sells them and pays as much as possible your creditors and/or you have to agree to a repayment plan.

Some debts are not dischargeable thru bankruptcy like student loans, alimony, child support and of course, taxes.

Now, let’s quickly look at the most typical types of consumer bankruptcy.

Chapter 7

Simply put, you lose almost all your possessions (maybe keep your house, depending on the state) and some other things, but are free from any debt you may have incurred prior to filing.

The court sells your non-exempt items to pay your creditors, but the creditors can never come back to collect that debt from you.

Chapter 13

This is typically a repayment plan, similar to credit counseling, but mandated by the court.  Depending on the court’s discretion, and your financial condition, the court may release you from some of your debt, but will require a portion (or all) of your debt to be repaid. The court will require a strict budget to be followed, a credit counseling program, and will not allow you to take on new debt for the life of the program, up to 5 years.

With either method, legal fees are also added in the mix and are required to be paid.

The Debt Settlement Alternative

While bankruptcy is a legitimate way to get out of debt, there’s a far less intrusive way to get rid of debt. Debt Settlement is not for everyone, but it’s a strong alternantive to bankruptcy.

Using a debt settlement program through a reputable and qualified company will save you thousands of dollars, hassles with lawyers and courts (not to mention fees), a lot of stress, and that big black mark on your credit.

Become debt free in around 3 years by negotiating settlements with your creditors for less than full balance. It’s faster and far less painful than bankruptcy.

The important thing is to take action and don’t let your debt problem continue.