One thing that most debtors try to avoid is bankruptcy. Its no secret that filing for bankruptcy will have a negative impact on the debtor’s credit score and can cause the debtor to lose his or her personal possessions, as well as preventing the debtor from obtaining a loan. However, those who experience a significant reduction in their income might realize that bankruptcy is the only viable option available to them when they have exhausted all debt relief programs available.
Those who are qualified for bankruptcy have often exhausted every other option, including working with debt consolidation companies, negotiating with lenders and asking friends and family members for loans. Under these circumstances, the bankruptcy is the only way to finally obtain freedom from harassing bill collectors and seemingly endless debt. Bankruptcy is not something that should always be ruled out.
One benefit of bankruptcy is that it can be one of the only ways that debtors can keep their homes. Individual states have a maximum amount of equity that they can have in their homes and still be able to keep it.
After filing for bankruptcy, creditors are not allowed to visit you and will not make any phone calls unless they want to receive fines and penalties from the courts. With chapter 7 bankruptcy, the debtor is completely discharged of all debt and will no longer have to make payments. At this point, the debtor can start from scratch and start building up a savings. If you apply for a credit card or a loan and make reliable monthly payments, you will build your credit score despite having a bankruptcy in your past. The bankruptcy will also eventually be removed from your credit score altogether.
Filing for bankruptcy can give debtors a peace of mind when they no longer have to constantly worry about whether their car will be repossessed or whether they will be able to come up with enough money for a mortgage. This can give many debtors a psychological boost that can motivate them to meet their financial goals.
When it seems like the debtor does not have any other options left, they should move as quickly as possible toward filing for bankruptcy. Debtors will stop at nothing to have the debt satisfied, including having your wages garnished. While the debtor might be able to keep the debt a secret, having wages garnished can be embarrassing.
About Author: Elizabeth Roque is an in-house writer for Franklin Debt Relief. She presents information about debt relief services, credit card debt relief and getting out of debt on a variety of financial sites online.