Bankruptcy
Today more people than ever are turning to personal bankruptcy as a way of solving
their financial problems. Although there was a small drop in the number of bankruptcies
filed from 1998 through to 2000, estimates say that this year will see nearly
1 in 70 people filing for bankruptcy. The sad fact is that due to the lack of
alternative methods of help, a large number of those who file bankruptcy owe as
little as $5,000. The main reason people take this harsh step with such a low
debt amount is the overwhelming pressure and harassment from eager collectors
trying to recover their money. With most organizations, such as consumer credit
counseling organizations, once they find that they are unable to help these
people they will normally just suggest bankruptcy.
The fear that there
is no way out and the lack of help from credit* collectors just makes the situation
worse.
New laws have been passed that make it substantially harder to take
bankruptcy as a way out. Financial institutions have been pouring millions of
dollars into Political Action Committee (PACs) to push these laws through. Some
estimates put the figure that these financial organizations have invested in so-called
educational programs for lawmakers at over $75 million over the last couple of
years. These banks and credit card companies want you left with no way out: trapped
with your debt for the rest of your life.
So how bad is bankruptcy on your
credit report? Well, you are probably aware that bankruptcy will stay on your
credit report for ten years. However most people are not aware that bankruptcy
will stay on your court records for 20 years and can follow you for the
rest of your life, if you apply for a job, loan, or various insurance. If you
apply for a loan, one of the first questions normally asked is "have you ever
filed for bankruptcy?" The easy, quick fix that bankruptcy is made out to be is
just not true.
You might have heard people say that there is not the stigma
attached to bankruptcy that there used to be. In our experience this is not the
case. Consider applying for a great job after you have filed bankruptcy. You know
going into the interview that they might run a credit report, many employers do
these days. This will probably effect the way you act during your interview. Even
if you get the job and your employer later obtains a bad credit report on you,
you will still have to explain the bankruptcy. Employers cannot fire you due to
a bad credit report but it can determine future promotion decisions.
You
also should not believe the stories about having an "A" credit ratting after a
year or so. Credit companies do not look kindly on people that took this method
of solving their debt problem. Yes you will receive credit card offers after a
few years but do you really want to be paying the "bad risk" 21% plus
interest rates? You might be able to eliminate your debt, but the effects emotionally,
the loss of self-esteem and the effect on your credit history will last many,
many years into your future.
The two primary forms of bankruptcy that individuals
can file are Chapter 7 and Chapter 13. Both types of bankruptcy in our opinion
should not be considered under practically any situation, and is a far too severe
solution to most financial problems.
Bankruptcy
Continued ®
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