In many cases, bankruptcy may not be a person’s best option. The severe consequences of filing for bankruptcy may just not be worth it. A bankruptcy will remain on a person’s credit report for up to ten years, making it difficult to obtain loans at reasonable interest rates, rent apartments, and even get a job in some cases. A debtor will not always be able to keep his or her more important possessions, like homes or cars. In addition, bankruptcy will do nothing to discharge some debts — child support, student loans, and many taxes, for example. If you are facing financial troubles and you wonder whether filing for bankruptcy is feasible for you, a Washington DC or Maryland bankruptcy attorney is available to discuss what you may be able to do.
When Bankruptcy is not the Best Option
- When most of your debt is secured, such as for a car. In a case like this, bankruptcy might wipe out what little unsecured debt you have, but, for the secured debt, you would lose what you have paid into the car as well as the car itself. You would have to get a new car, and, with a recent bankruptcy in your credit history, you would have to pay significantly more for it in interest charges.
- When debt is high, but not overwhelming. This may be a fine line but there may be alternative ways to improve your situation. You could sell an expensive residence or car and buy a cheaper one with less debt and less payments. You could take on a temporary part-time job to wipe out credit card debt, for example.
- When there are less extreme alternatives. A debt consolidation loan is often a feasible alternative to filing for bankruptcy. This loan enables you to pay off all of your current debts and then make a single monthly payment to the debt consolidator. The interest rate on the consolidation loan may be higher, but, over the long run, you are likely to pay less. Moreover, it can free up money from month to month to give you additional breathing room.
- If you file for Chapter 13 bankruptcy. A Chapter 13 bankruptcy creates a repayment plan so that you can pay off all of your debt in three to five years. Many people are not comfortable with the supervision that comes along with a Chapter 13 bankruptcy. The court and bankruptcy trustees will examine every detail of your income and expenses and will order where you can live and what you can do.
Filing for bankruptcy should never be a person’s first option. It should be a last resort, only considered after you have exhausted all other options. A bankruptcy has a huge negative effect on your credit history for up to ten years. If you are considering filing for bankruptcy and are not quite sure about it, contact a Boston or Washington DC bankruptcy lawyer at the law firm of Kevin D. Judd to learn more about your options.