Declaring Bankruptcy – Is This the Right Decision for Your Situation?

declaring bankruptcy

If you find that you are constantly fielding calls from collection agencies who are demanding that you repay a debt but since you do not have any available funds, you might start to seriously consider declaring bankruptcy.

While declaring bankruptcy is one way of dealing with debt, it should never be considered a get out of jail free card that you can play.

Filing for bankruptcy will not simply make your debt disappear, and it has serious long-term consequences which will follow you for the rest of your life.

Filing for bankruptcy is not easy, and it is not cheap. The reason for this is because the courts do not want everyone filing for bankruptcy every time they fall behind on their mortgage payments or overdue credit card bills starts to pile up. When declaring bankruptcy, they are going to have to hire a lawyer who will help them fill out all of the necessary paperwork and file with the courts.

Just because you have filed, does not mean that you are in the clear. The bankruptcy court is going to have to look at your situation. If the court feels that you have a case, they will allow you to declare bankruptcy.

If they do not, you will be right back where you started and out your filing fees and the cost of your lawyer who will have insisted that they are paid up front.

Reestablishing Your Credit Rating

If you have managed to successfully declare bankruptcy, you are going to have to immediately start going to work on repairing your credit history. The sooner you are able to start doing this, the better off you will be.

It is important that you understand that lowering your credit ranking is much easier and quicker than rebuilding it is going to be. It will take time before creditors feel that you are a sound risk.

One of the best ways for you to start reestablishing your credit rating after you have declared bankruptcy is by taking out a secure credit card. This is a credit card that will insist that you pay them a certain amount of money up front before they issue you a credit card. They will only give you a very limited amount of credit, usually the same amount as you paid them.

Each time you pay off your bill, your credit rating will start to improve and eventually the credit card company will feel secure enough to grant you a small, unsecured line of credit. At this point, your credit rating will start to get better and you will be able to gradually take out bigger and bigger loans.

No one wins when there is a bankruptcy case.

Most creditors are more than willing to work with you when you find yourself in a jam.

Before approaching the court system, you should speak to your creditors about things like debt settlement and reduced monthly payments. Most of the time creditors are willing to work with you provided you are willing to meet them part ways.

Author

BA in Accountancy, he entered the entrepreneurial world by starting his first online marketing business in 2004. Passionate about personal finance, the stock market and a digital marketing addict. I also love to read books on entrepreneurship and technology and always on the lookout for new opportunities. I'm an avid golfer and currently a 15 handicapper.

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