Avoid Bankruptcy: Several Reasons behind it

A consumer when find him in the trap of debt would definitely would like to avail the benefit of Chapter 7 or Chapter 13 (Bankruptcy), wherein a debtor gets a chance to eliminate or reorganize his debts by selling his assets or by following a repayment plan which is affordable to him. If one finds a simple way of being out of his debt is to be declared as bankrupt then it is not a really very good idea. Try to avoid this! The simple reasons behind this are that Bankruptcy worsens the financial situation of the debtor by ruining his property and hitting the credit profile badly. The bankruptcy law has several negative consequences:

• The credit rating of a consumer is badly hit with the filling of the Chapter 7 (Bankruptcy) case. The credit score is lower down from around 200-250 points which creates a bad impact on the financial profile for at least next 7-10 years. It will also hamper your entry to towards the easy access to the financial market. This indicate towards consumer loans and credit cards.

• Bankruptcy does not protect all types of assets in case of filling chapter 7, so there are chances of loosing the home, car and other assets since assets are sold to pay off the dues and until they qualify for federal or state exemption chances are that you can loose properties if personal bankruptcy is not avoided.

• Bankruptcy or Chapter 7 filling will not get rid of all the dues such as student loans, taxes and other unpaid dues. Thus it is better to avoid bankruptcy and go for a debt settlement or arrange for an alternative payment plan with the creditor according to the convenience and financial ability which will help to reestablish your credit in the market fast.

• It will affect your financial record badly, you will not be able to buy or rent a home or starting a business would be difficult, it will also led you to go through a tough security clearance for any legal formalities.

• The reestablishment of new credit would be very difficult since the bad credit score will remain in your financial record for around 2-4 years. During this times getting a loan or credit card will be very difficult and even if a consumer gets it will be on higher rate of interest and tough financial terms and conditions.

• Even if someone has filed bankruptcy, there's a chance that the creditors & lenders may repossess or foreclose property on which they hold a lien. This is because bankruptcy relieves you from the personal liability to repay debt. Until a consumer try to pay down the entire balance, creditors/lenders have the right to repossess or foreclose property as there's already a lien on it.

• Bankruptcy law even protecting by 401k retirement plans can protect only $1 Million in the debtor account and beyond which any amount would be used to pay off the debts.

We find that it is better be avoided than to be trapped under the net of Bankruptcy