What is Bankruptcy?

Many people think that filing bankruptcy can be the worst, or close to the worst thing they can do, believing it will ruin their credit and result in bad things happening such as losing their home, their auto or other property.
The reality is just the opposite.

In almost all cases, filing bankruptcy can be the best thing you can do for yourself and for your credit. It eliminates unpayable debt, it protects you, it protects ALL your property and it is usually a giant stress reliever.

Also, Bankruptcy relief is guaranteed by law. This is huge. For instance, the many debt consolidation programs you may see advertised on television or on the internet have no guarantees. Beware of them! They like to say they can reduce your monthly credit payments and reduce what you owe. Well, ask them to guarantee that. They won’t; because they can’t. And remember this, there are usually many hidden fees they charge you; those commercials are not free, far from it.

In fact, per the Federal Trade Commission less than one in six debt consolidation programs that people enter into are successful, and it usually happens when there arc no more then two debts involved. That is generally because no creditor is wider any duty to agree to any debt reduction or payment modification. And even if a creditor does reduce what you owe, you have to pay income tax on the amount reduced. Often what happens, in cases where you have three of more debts, one or two creditors may agree to a debt reduction, but the others do not, but you do not know that, and bad collection stuff starts happening.

These debt consolidation programs are notorious for not providing you with specific and true information as to what your creditors have or have not agreed to in their program and people often find themselves being sued by creditors six or seven months into the program.

Realistically, you have two choices. One, if you own a home and have a lot of equity in it, you can try to get a home equity loan with a moderately low to moderate interest rate and use it to pay off high interest credit card debts. Of course you have to pay on this loan for many years.

The other is choice is bankruptcy, where you fully eliminate your debts and you are done. Remember, in bankruptcy, your creditors are under a duty to eliminate your debts and not bother you anymore and there is no tax to be paid on this debt elimination. Very huge.

A bankruptcy case generally lasts a little over three months. Then your debt is officially gone. The debt consolidation programs usually take a minimum of at least three years of monthly payments AND you are not sure what is happening, if anything.

One other thing, also huge. If you pay your normal obligations for a year after your bankruptcy, on such things as utility bills, car loan payments and the like, and you pay them on time, you should have a credit rating of 700 plus after a year. That is also very good.