Many people turn to bankruptcy out of desperation when they don't see any other way of solving their financial problems. However, everyone should be careful to examine all other options before resorting to bankruptcy. If you're going to petition bankruptcy, it's going to have some long-lasting negative effects on your credit and thus your life in general. Here are three things to keep in mind for making your final decision regarding personal bankruptcy.
1. Bankruptcy will stay on your credit score for about 10 years.
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It's important to realize that your bankruptcy will seriously hurt your credit score for some time, and this will make it more difficult to secure a loan for a house or a car. If you are able to get the financing you need, you'll likely pay much higher interest rates as a result of your bankruptcy. This is not too difficult to understand, since banks and other lenders want to make sure that you are able and willing to pay back the loans. Your credit history serves as a guide to anyone trying to make that decision.
This doesn't mean you'll never be able to purchase a home or car again. It just means you're going to have some obstacles, and there may be some lenders who are willing to give you a loan pretty soon after bankruptcy because they know that you are now free of debt. Be careful, however, with those interest rates and make sure to instill some discipline in your family's spending so you don't end up making the same mistakes again.
2. There are other options for getting out of debt.
Before rushing to declare bankruptcy, you need to look into other possibilities such as credit counseling, negotiating with creditors, and even getting a part-time job to bring in some extra income. These simple steps are not always possible, but when they are they can bring some much-needed relief without the consequences of bankruptcy.
3. Always speak to a professional about your options.
At the same time, however, you should be aware of the person's intentions. For example, a credit counselor may actually be working for a credit card company and may tell you to avoid bankruptcy because they know the credit card company won't get any money. Likewise, a bankruptcy attorney may try to encourage bankruptcy in order to receive a commission from the case. Make sure to ask questions so you can understand how the law applies to your particular circumstances instead of receiving some generic advice.
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