Friday, December 4, 2009

Before You File Bankrupt

For the first nine months of the year, individual bankruptcy filings totaled 1.07 million, according to U.S. Bankruptcy Court statistics compiled by Automated Access to Court Electronic Records. Between July and September, more than 5,900 bankruptcy petitions were filed each day in courts across the nation, AACER statistics show. They peaked at more than 6,000 per day in May, and have edged down only slightly since that time.

I remember back in 2007 when I was contemplating filing for bankruptcy. I was way in over my head at the time. I had a new car, a new house, student loans and other random debts like store cards and credit cards. Thankfully, since attending Financial Peace university I have not only learned how to avoid filing bankruptcy I have actually paid most of my creditors back and I am down to 2 YES 2 Final bills. There are many situations in which bankruptcy is not the best solution available, you need to study your situation closely. Here are five cases in which bankruptcy is not the best option:

1. You can pay off your debts within a few years while maintaining a reasonable standard of living

Sometimes having some discipline and setting a budget is all you need to do in order to pay off your debts within a reasonable time. You don't need to starve yourself, but if you can stick to a simple plan and eliminate your debt within the next few years, then bankruptcy may not be necessary after all.

2. Your most worrisome debts will not be eliminated in bankruptcy

You should be aware that some kinds of financial obligations do not usually go away when you file bankruptcy. If you are most concerned about student loans, child support obligations, or criminal fines, then bankruptcy is not the solution. In most cases, these financial obligations will remain.

What about federal income taxes? That depends, but be aware that in many cases they will not be discharged.

3. You don't want to lose your assets.

When you file Chapter 7, you will need to liquidate any nonexempt assets in order to help pay for your debts. You may not want to give away these assets, such as a second house or an expensive car. Finding a way to pay off your debt without bankruptcy can help you keep these assets safe from creditors.

4. Most of your debts are secured by collateral.

If your unsecured debts are only a small portion of your total obligations, then bankruptcy doesn't make sense. Chapter 7 will not eliminate your responsibilities such as paying off your mortgage or car loans. If you want to keep the house, you'll have to keep making the mortgage payments. Otherwise, you can just lose the house without having to declare bankruptcy and spent $1,000 to do it!

I realize things can get frustrating after thing such as an illness, job loss or divorce causing people to just give up. I completely understand it because I fell into a rut myself a while ago. If you are contemplating filing bankruptcy I urge you to think about it long and hard before doing so. Deciding NOT to file was one of the best things I did for myself now I am on the road to recovering WITHOUT a judge looming over my head and it feels great!!

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