How to avoid bankruptcy is not always an easy path or decision.   However, even greater is the decision to declare bankruptcy and manage the ripple effect that it will have in your life.  It may impact your ability to secure jobs, get credit in the future, lease a car, buy a home, not to mention the pressure and strain it may put on the relationships you have with people around you.  There are alternatives to bankruptcy, consult with a financial planner, a trusted banker or an attorney before making any final decision on how to best resolve your debt issues.

As pressures mount to relieve the increasing pain of debt problems many fall into the arms of the temptress named bankruptcy.At first it looks like an easy way to “wipe the slate clean” and get away from creditors and debt collectors… a fresh start with no debt, no payments, no more sleepless nights. Sounds easy.

Well, some say it’s easy but consumer bankruptcy is never as simple as it seems at first. If the true cost of a bankruptcy is considered before filing it, most would do absolutely everything they can to avoid bankruptcy laws.

Six Future Financial and Emotional Costs That Must Be Faced After Bankruptcy

1. Most financial advisors consider bankruptcy the most damaging item of all possible negative information exposed on someone’s credit report. Chapter 7 will stay on credit bureau reports for ten years and Chapter 13 will stay for seven years. Credit reports are used to make judgments not only on someone’s credit worthiness but also suitability for employment. For years to come negative credit reports will come up when applying for credit, applying for a job or even renting an apartment.

2. With chapter 7 bankruptcies (the only way to attempt to wipe the slate clean) not only will debt go away but non-exempt property will go away also. What could be considered prized possessions will be sold in a liquidation sale to pay debts. Possessions that may have a strong emotional attachment will be liquidated if they are non-exempt property.

After the liquidation sale if all bank and saving accounts are closed and vehicles are gone the bankruptcy filer may find it extremely difficult to start over with a clean slate if their damaged credit report will not allow them to easily find a new bank or qualify for a car loan. This could very well cause a worse financial crisis not being able to drive to work or cash a paycheck.

3. Chapter 13 is essentially a payment plan rather than an asset liquidation. The court appointed payment plan can stretch out over five years. So property will not be lost with a 13 filing however what most people don’t realize is that the judge can rule to garnishee the wages of the filer for the entire payment plan period substantially reducing take-home-pay for up to five years.

4. Personal relationships will change after bankruptcy. Opinions of family members and colleagues at work about how well someone can handle their finances as well as life in general can change after someone files for bankruptcy. This can dramatically change social status and social opportunities if a bankrupt stigma is hard to cast off.

5. Avoiding bankruptcy is critical for someone who owns a small business. This will devastate the growth prospects of a small business if not put the small business person out of business all together as damaged credit reports dry up working capital, loans for inventory and credit lines. Credit is the lifeline of small business. The sad aspect of this scenario is that employees, customers, and suppliers will also suffer.

6. Some contemplating bankruptcy think that if they can’t buy a home or a car for a while they at least can lease or rent not knowing that a credit report is considered heavily with rental and lease agreements. Credit reports weigh on someone’s ability to get life, health and auto insurance issued. Even getting a security clearance if one is needed for a job is much more difficult.

Evaluating Every Alternative to Bankruptcy

Debt management companies, debt consolidation loans, credit counseling and debt settlement are all alternatives to avoid bankruptcy. Although some of these alternatives also inflict damage to credit the damage should be much less harmful than bankruptcy. Each of these debt strategies need to be thoroughly evaluated and eliminated before an appearance before the local bankruptcy judge is scheduled.

Author: Mason Smith

Article Source: http://EzineArticles.com/?expert=Mason_Smith

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