Declaring bankruptcy will in many cases help a person get needed debt relief. Bankruptcy is akin to wiping the slate clean. Many old debts are erased and those that must still be paid are often greatly reduced. However, it is important to realize that declaring bankruptcy does have its pitfalls.
How to Declare Bankruptcy
Before you decide to declare bankruptcy, talk to a good bankruptcy lawyer. Most lawyers give a free initial consultation, so you do not need to worry about prices.
Be sure to explain to the lawyer just how you got in debt. This is important, because certain debts cannot be erased by declaring bankruptcy. These include, but are not limited to, alimony payments, court imposed fines and back taxes owed to the IRS.
If you do decide to declare bankruptcy, be sure to hire a good lawyer to walk you through the process. A good lawyer can also take your case to court if your creditors decide to challenge you in order to get you to pay off past bills you are trying to discharge.
Can You Keep Anything?
Some people have the mistaken impression that you will lose everything if you declare bankruptcy. This is not necessarily the case. In some cases, you may be able to keep your home. You can also keep items that you need in order to earn a living. For example, if you are a professional handyman, you can keep all your handyman tools. Which items can and cannot be kept is determined by a court appointed mediator.
What do You Lose?
If you declare bankruptcy, you lose your credit score; it goes down to zero. Rebuilding your credit score after declaring bankruptcy is not easy, although it can be done through qualified credit repair service companies. Naturally, you are also likely to lose certain assets.
In most cases, you will have to agree to a court mediated plan for paying off the rest of your debts. This plan usually lasts from three to five years and is a long term repayment plan with reasonable terms and conditions. However, if you do not make your payments on time and in full, you could face serious legal consequences.
Declaring bankruptcy can be an effective way to get debt relief. It will automatically put a stop to foreclosure proceedings and can eliminate a large portion of your debt. However, it is not always the best option and in fact should only be used as a last resort.
A person who is having serious financial trouble should start with debt negotiation, cutting back on credit card use and sticking to a budget. Trying alternative ways to earn money is also a good idea. However, if all else fails, a person may want to consider declaring bankruptcy and starting afresh financially.
This guest post was provided by DebtSuccess.com, the debt management experts specializing in debt consolidation, debt relief, credit repair, tax debt, debt settlement and more.
Image Source: SocialLendingWatch.com
