Many people believe that filing for bankruptcy is an act of defeat. They don't regard the process has a surrender, and certainly not as a victory. Yet the fact is that bankruptcy does not have to be a battle lost. In many ways, bankruptcy is a fresh start- you can satisfy your creditors and refresh your financial situation. While a bankruptcy does take sacrifice, there are many times when it is a worthy investment. In the short run, bankruptcy will probably damage your credit score and lower your standard of living, but years down the road you may be flourishing financially in a position you would have never achieved had you not taken the leap into a bankruptcy.
When you are drowning in debt, you have a few options. One is to use "flotation devices" like putting off creditors and trying for loans, which will only amount to more and more debt as the years go by. Eventually, these methods of "staying afloat" will die out, and you will be left floundering in the ocean of debt once more. In order to avoid this constant sinking, you need to drain the debt from under you. Bankruptcy does just this. It pulls the plug that is keeping your debt deep, and allows you to emerge from your struggle to stay buoyant. If you can successfully file for bankruptcy, you may finally be able to wade out of the water, and relax on the shore.
If you have a financial advisor or a lawyer that is recommending that you file for bankruptcy, it is best to get a second, and possibly a third, opinion before complying. Every financial situation is unique, and there may be other ways that are less damaging and will be just as effective at eradicating your debts. Some financial advisors may have the knowledge to point you in another direction, and use other tools to refinance your life and pay off your loans and debts. When there isn't another option, you will need to choose the type of bankruptcy that is best for you.
Two major bankruptcy types are used frequently in the United States. Normally, a Chapter 7 is the bankruptcy of choice. This method of bankruptcy is used by people who have few assets and can't work out a repayment plan on their existing debt. When you file for a Chapter 7, most of your assets will be turned over and sold to repay debts. Once your financial obligations are satisfied, you will emerge from the bankruptcy process and start fresh. A Chapter 13 bankruptcy differs from this, in that this method includes a structured payment plan. Normally, a Chapter 13 bankruptcy takes more time to complete, because the payment plans can stretch on for years.
In both types of bankruptcy, your credit score will be affected. While this is unfortunate, it is not too hard to repair your credit over time. Instead of using a credit repair company, you can try to obtain a secured credit card and show your financial responsibility by how you handle it. This type of card requires you to place a cash deposit and you can use the amount that you have placed on the card. The credit card company who issues you this card will report your activity to credit bureaus, which may help you to bolster your credit scores. If you become a steward of your finances and spend wisely, then you may be able to apply for a loan or mortgage in the future.
If you have filed for bankruptcy, then your main goal will be to avoid ever visiting this same spot in the future. Strategize with your money so that you do not end up in a dangerous situation financially, and have to undertake the same bankruptcy process once again. By being wise, you will be able to boost your credit score and have "smooth sailing." No longer will you need to sink under the weight of constraining debt- instead you will be able to relax and enjoy the fun of a debt-free lifestyle.