Top 10 Reasons Not To Be Afraid of Bankruptcy
For a number of reasons, there has been a stigma associated with bankruptcy that causes people to shy away from discussing the topic. The fact is that bankruptcy is a rather common legal step taken by Americans. In 2009, there were more than 1.4 million bankruptcies in the country. The estimated population was 305 million men, women and children. That means 1 out of every 217 people filed for bankruptcy in 2009. You are definitely not alone.
Often times, a debtor has to decide whether filing for bankruptcy is a worse alternative to losing their home, their car, or their valuables. It doesn’t take much to figure out that keeping these belongings is a sound decision, especially when you realize the relief you gain from filing a bankruptcy. Bankruptcy is a way to give debtors a second-chance, and choosing bankruptcy can prevent a foreclosure or repossession.
A fresh start. That's exactly what legislators contemplated when they created the bankruptcy laws. The purpose behind these alternatives is to give people a second chance or fresh start to their financial lives.
While bankruptcy filings are generally available to the public, think about whether you would ever make the effort to look for these records about anyone you know. Anyone can go to bankruptcy court and look up individual bankruptcy cases and some localities publish the latest lists of bankruptcy filings in the newspaper. But the truth is that most people won't know you filed bankruptcy.
If your boss does find out, which is far from likely, he or she cannot treat you differently because of your bankruptcy. In fact, there's a federal law that guarantees that protection. Businesses that violate the law face serious penalties.
Another federal law protects people who have filed from bankruptcy from having that action affect their chances of getting federal school loans.
While a Chapter 7 bankruptcy stays on your credit report for 10 years and your credit score is severely affected by a bankruptcy, the damage is far from permanent. Many debtors who had credit scores that hovered just above or below 500 after a bankruptcy were nearing 700 in a year or less.
Many people think you will never qualify for new credit cards after a bankruptcy, but many do and that is the best way to bounce back. Just limit your spending on your new cards to a single purchase that is paid off each month. Once you have several months in a row with new credit - much of which you do not use - your credit scores will slowly rise. Be responsible and never miss the deadline on any bill.
Once you have your credit at or above 700, you should be able to get a decent rate for a home loan. Some lenders may hesitate when they see the bankruptcy entry on your credit report, but others will see the new financial pattern you have created and realize that filing bankruptcy once means you can't file again for some time.
Instead of thinking of bankruptcy as the worst thing that ever happened to you, think of it as a new lease on life and a second chance to build a solid financial future. Bankruptcy is simply a method of eliminating your unsecured debt, enabling you to have a fresh start. If you work hard to avoid the traps that put you in financial trouble, bankruptcy could be the moment in life when you turn your finances around.