Is Filing Bankruptcy the Right Decision for You?

There are many good reasons to file bankruptcy. One of the most important is the automatic stay. That means that as soon as you file your bankruptcy, creditors must immediately discontinue attempting to collect your debts. They can no longer call you, send you letters or knock on your door. They are not allowed to communicate with you in any way. If you have been hounded by nagging bill collectors, you know what a relief it would be to put a stop to their persistent efforts. Any garnishments of your wages will also cease. It will, at least temporarily, prevent any immediate foreclosures or repossessions.

Another positive aspect of bankruptcy is that it may allow you to eliminate much of your debt. Debts such as outstanding credit card balances, medical bills, signature loans and other unsecured debts will disappear if you qualify for Chapter 7 bankruptcy. You will no longer be responsible for paying them. This is known as discharging your debts. Not all debts are dischargeable. Student loans, child support, recent back taxes and some punitive damages for criminal acts cannot be eliminated by claiming bankruptcy.

Of course, there are negative effects of filing bankruptcy, the biggest one being that your credit will be damaged for some time to come. It will be difficult to obtain credit with a reasonable interest rate in the near future. The bankruptcy will stay on your credit report for the next 10 years.

Unless you pay them off before you file bankruptcy, you will lose all your credit cards. If you own any luxury items, you may be forced to give them up as well.

Some people feel a loss of self-esteem or embarrassment. They feel like a failure.

The answer is yes. You may not be able to obtain credit for a year or two, but after that you will find lenders willing to work with you. You don't have to have those luxury items to live a decent life and credit cards were a part of the problem, not the solution. As for feeling embarrassed for filing bankruptcy, remember, it is no more embarrassing than having your car repossessed or your home foreclosed on.

If you have come to the conclusion that bankruptcy is the best option for you, consult an attorney who specializes in bankruptcies. She will be able to advise you of your options and watch out for your best interests during the procedure. Bankruptcy may be the very best decision you can make for your financial future.