Bankruptcy has been touted as an easy way
to get out of debt, but many people have some incorrect information
about bankruptcy. Take a look at a few of the common myths.
With bankruptcy, your credit is immediately cleared. That’s
absolutely not true. In actuality, your bankruptcy information
will remain an official part of your credit report for seven
to ten years.
Bankruptcy doesn’t impact future credit.
Think of bankruptcy as a formal statement that you can’t
or won’t pay debts you currently owe. Then consider
how potential creditors
are going to view the fact that you’ve declared bankruptcy.
If you file bankruptcy, your debts are immediately resolved.
In truth, you’ll likely be paying off those debts for
years. The courts will decide what’s fair and you’ll
be making a single monthly payment, but it’s not a free
pass to ignore your debts.
The two most common types of bankruptcy are chapter
7 and chapter 13. Both have
advantages and drawbacks. Before you decide that bankruptcy
is your only way out, consider talking to a debt
counseling. Credit counseling services are often available
at little or no cost.
Debt Counseling is an often-misunderstood service that offers
benefits to many. Whether you’re an individual, couple,
family or even the owner of a small business, you’ll
find counseling agencies that can help. Some programs are
available free while other companies charge for their counseling
services. Before you make the first appointment, ask about
the cost. It’s good to have the price of services in
writing early in the process. After all, you’re already
battling bills and the last thing you need is to add another
significant expense.
There are debt counseling agencies that work without any
fees. But is a free service worth anything? Actually, you’ll
find that some free debt counseling companies are very reputable
and can help your situation. The two biggest advantages are
that the company can negotiate with your creditors - ending
harassing phone calls and endless overdue notices - and can
help you establish a budget and better spending practices.
Before you show up to the first appointment, compile a list
of household expenses and income. Don’t include any
income you can’t count on – such as gifts from
friends or family members or winnings from gambling. Sometimes,
simply putting those figures on paper can put your debt situation
into better perspective.
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