Millions of Americans live day-to-day with the burden of carrying a substantial amount of credit card debt. As long as they maintain sufficient streams of income and don’t make unnecessary charges, they may be able to keep it up for years at a time.
Unfortunately, far too many people are just one mishap away from bankruptcy. Folks who unexpectedly lose their jobs, face medical emergencies or sustain uninsured damage to their homes may become unable to handle high-interest credit card debts and other obligations. In these cases, bankruptcy can seem like their only option.
The Basics Of Bankruptcy
If you’re thinking about filing for bankruptcy, you’re not alone; people of all ages struggle with high-interest credit card debts that interfere with other aspects of their financial lives.
There are two basic types of consumer bankruptcy. When you file for Chapter 7 bankruptcy, a judge will supervise the liquidation and sale of many of your assets. Your secured creditors will be paid off with these proceeds, and your unsecured debts may be reduced or forgiven. By contrast, Chapter 13 bankruptcy allows you to keep many of your assets during a “reorganization” process that can reduce but not eliminate your debt burden.
Public, Costly and Long-Lasting
If this sounds like a fair trade-off, you might want to read the “fine print” about bankruptcy. Unlike the debt management plans that credit counseling agencies may offer, bankruptcy becomes part of the public record as soon as you file. The process may take years and can force you to sell many of your important assets and possessions.
What’s worse, its effects can continue for some time. People who declare Chapter 7 or Chapter 13 bankruptcy may find it difficult to obtain loans, find suitable rental housing or pass employer-mandated background checks for up to 10 years.
Hiring an Attorney
Although it’s not mandatory, most legal experts will advise you to hire an attorney before filing bankruptcy. This increases your chances of navigating the process successfully. However, it can also add thousands of dollars to your bankruptcy-related expenses.
Bankruptcy can dramatically reduce your credit score and hurt your ability to obtain and use credit. Under most circumstances, you won’t be able to use the credit cards that you carry into the process. Going forward, it could take years for banks and credit card companies to once again offer you loans at favorable interest rates.
An Alternative to Bankruptcy
Credit counseling organizations offer debt management plans that incorporate many of bankruptcy’s positive elements without these unpleasant drawbacks. When you enroll in such a program, you’ll receive personalized service from an experienced team that negotiates interest rate reductions and more affordable debt payments on your behalf.
Still thinking about bankruptcy? Learn more about the process of filing for bankruptcy and see how fast you can get out of debt by filling out our debt estimate form. Our certified credit counselors are always on hand to offer helpful assistance.