Avoid Bankruptcy: Why You Need to Avoid Bankruptcy

At first glance, bankruptcy may seem like the only possible way out of bad credit or the financial crisis you find yourself in. The stress and pressure of debt can certainly be overwhelming. Whether it’s because of something out of your control, like job loss or a medical crisis, or overspending and self-induced credit card debt, it’s not always the best solution. In fact, most bankruptcy cases can be avoided. Anyone who has been through bankruptcy can tell you what a devastating and life changing event.

bankruptcy in history

In the US, federal bankruptcy laws were temporary responses to bad economic times. The first bankruptcy law was enacted in 1800 in response to land speculation, but it was repealed 3 years later. Two more laws were enacted in the late 1800s and also repealed. All of these laws contained some concession for the discharge of unpaid debts for individuals and corporations. Modern bankruptcy laws emphasize reorganization. In 1978, the laws were substantially amended and it was at this time that Chapters 11 and 13 were established. Throughout the 1980s, 1990s, and since 2000, several other laws have been passed to clarify the rules and protect the consumers. For more information, see the Bankruptcy Yearbook and Almanac.

the great myth

Many people think that after bankruptcy they will be able to start over financially and have a “clean slate.” The reality is that it causes long-term damage not only to your credit report, but also to your psyche. Bankruptcy will stay on your credit report for up to ten years. Even after that, loan applications and many job applications ask if you’ve ever applied. No matter how long it has been since the bankruptcy, you are bound to answer “yes.” He remains in court records for twenty years. Also, it’s important to realize that not all debts can be discharged, such as alimony, child support, student loans, and most tax claims.

declare bankruptcy

There are also other reasons to avoid bankruptcy that you may not have realized:

Harder to qualify for a mortgage or rent a home

Harder to qualify for a car loan or other loans

You will have higher interest rates

You may have to liquidate assets or set up a payment plan

Being subject to a property lien

slow and complicated process

Prevent or delay personal goals

tarnish social status

damage business

damaged marriages

The bottom line is that bankruptcy is not a wise solution for all debtors and is followed by damaging consequences. The best debt solution is to put all your energy into a debt management program through a professional, licensed credit counseling agency. It is your job to present a solution to your debt problem. With guidance, you’ll gain the resources to be debt-free, your credit won’t be completely ruined, and you’ll gain peace of mind.