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Bankruptcy: Should You Consider This Option?

By Philip Tirone

When overwhelmed by debt, why should bankruptcy be a consideration for a temporary financial meltdown? It shouldn’t be considered if you can recover your financial footing quickly. But if there doesn’t seem to be any relief from your burden of debt, maybe you should consider bankruptcy.

Bankruptcy is a great concern for people struggling financially, especially when they’re doing all they can to stay afloat financially. Why would they willingly identify with people who may or may not have paid their bills on time? What does bankruptcy do for them except further their shame about their financial situation?

I have met many people who are against bankruptcy. They would rather continue struggling financially  than file bankruptcy and rebuild their financial lives.

One of the main hurdles for people I have spoken with is the stigma they associate with bankruptcy. Their next hurdle is waiting seven years or more for the bankruptcy to drop off their credit report. Mentally, they associate bankruptcy with seven years of financial death. I understand their fear of bankruptcy and their hesitancy in considering bankruptcy as an option.

Whenever someone asks me about bankruptcy, I consider their emotional and financial stress. No one wants a negative credit history or to be known as an irresponsible person not worthy of credit.

Here are a few ideas to consider when asking if bankruptcy is an option for you. First, you are freed from the constraints of your past credit history. Immediately after your bankruptcy is discharged, you can begin rebuilding your credit history.

Then there’s emotional peace in your home. You’re no longer stressed by creditors calling you all hours of the day, nor is there an endless stream of collection notices in your mailbox. While you should always repay debts you owe because it is the right and responsible thing to do, filing for bankruptcy may be the only way you can make a clean break from your overwhelming financial crisis.

Your beliefs play an important role when deciding whether you should file for bankruptcy. If you strongly believe in keeping your promises, accepting bankruptcy is an extremely hard decision for you. But sometimes bankruptcy is your best option.

If you are struggling financially and wondering, Should I file for bankruptcy? consider other alternatives:

Debt consolidation allows you to combine all your debts into one loan. One payment is certainly better than multiple payments or robbing Peter to pay Paul.

Loan modification programs and reductions in payments are another option for distressed homeowners. Contact the hardship department for your creditors and ask them to consider a change in terms to help you make it through the financial crisis you are experiencing. Some banks are willing to accept reduced payments. They know that many people are teetering on the verge of bankruptcy. In fact, you might want to call your mortgage lender and ask: “Considering my current financial distress, is bankruptcy a viable option or can I qualify for a loan modification program?” Rather than having all your debt discharged during a bankruptcy, many creditors will simply lower your payments. After all, something is better than nothing.

Should I file for bankruptcy if none of these options are available?

If you have exhausted all options, you may want to consider filing bankruptcy, especially if you face the possibility of losing property. Bankruptcy enables many people to hold on to their property despite their financial woes. Before deciding if bankruptcy is for you, evaluate your finances. If you cannot meet the minimum monthly payments for your bills, filing for bankruptcy will stop the late fees and interest on your past due accounts. Bankruptcy also gives you an opportunity to learn from past mistakes and apply what you’ve learned when making a new start. Emotionally, you’ll feel better because you won’t have to worry about harassment from creditors, losing sleep, or worrying about your debts.

A bankruptcy on your credit report will definitely lower your credit score, but so will late payments, no payments, repossessions, and collection accounts.

After you’ve filed bankruptcy and the bankruptcy is discharged, you must immediately begin to rebuild your credit. The 720 Credit Score program teaches students how to properly rebuild their credit after bankruptcy or a financial meltdown. Some students who have followed the guidelines in the program have been able to purchase a home two years after bankruptcy! A bankruptcy cannot limit your future financial success if you establish good financial habits, change your spending habits and pay your bills on time. You can achieve financial stability after a bankruptcy.

Your decision as to whether or not to file bankruptcy is a personal one. Learning how to create a budget and sticking with it is always a financial advantage. Seriously consider all of your options and that includes bankruptcy before making a strategic choice. If bankruptcy is your best option, begin the process today!

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