Home Spending and Borrowing Top 5 Reasons Bankruptcy Should Be Your Last Resort

Top 5 Reasons Bankruptcy Should Be Your Last Resort

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Have you reached your lowest point financially? Have you searched high and low for a solution for your ever-mounting debt repayments but can’t quite seem to get your head above the water? Many people in your situation are often sold the bankruptcy dream. However, bankruptcy is not the quick fix its made to out to be. It’s definitely a reprieve, but one that will put you in a 7-to-10-year period of financial hardship.

Below are the 5 reasons why you should opt for non-bankruptcy alternatives despite the challenges you are facing now.

  1. Guaranteed High Interest Rates and Loss of Credit

After you have filed bankruptcy, your credit rating will take a nosedive. This makes it almost impossible to get credit, and when you do you’ll incur astronomical interest rates. You might as well kiss any dreams of owning a home, buying a car or renting a place to live away.  You will also not be able to access credit cards for some time. The only way to rebuild your credit after bankruptcy is to take out these high-interest loans and repay them.

  1. Attorney’s Fees and Court Costs

Filing bankruptcy is not free. You will incur filing costs and attorney fees. It might cost you anywhere from $1000 to $2000 depending on the state.  You should factor in these costs before you decide to file for bankruptcy.

  1. Job Restrictions

According to a survey conducted in 2012, almost 50% of employers verify the credit reports of new hires. It doesn’t matter what your level of education or experience is, having a bankruptcy on your record will make it harder for you to get a good job. You come off as negligent or careless.

  1. Loss of Nonessential Property and Possession

Unfortunately, you might not go scot-free after declaring bankruptcy.  A number of states only protect essential possessions which differ by state. Depending on the laws in your state, you could lose everything deemed non-essential.

  1. Unintended Consequences

Going bankrupt affects other people as well. If you have a family business, a bankruptcy will affect it even if the business is conducted as a corporation. You might be unable to access loans since they are often cosigned by the owners. This may occasion cash flow problems and negatively affect the financial health of the business.  As a results owners, employees and suppliers of the business could face financial challenges.

  1. No Clean Slate

Bankruptcy will not remove all your debts. A bankruptcy discharge is limited only to certain debts.  Debts resulting from alimony, fraud, child support, drunk driving judgments, government student loans, divorce settlements, alimony and income taxes are not considered. Also, any debt you incur after the declaration of bankruptcy will not be eligible for another discharge until 6 years are over.

Before you file for bankruptcy, get I touch with a financial adviser to help you assess your debt situation and explore non-bankruptcy alternatives. This might involve reaching out to friends and family or selling off some of your property. Whatever the cost, it might just be more worthwhile than declaring bankruptcy.

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