Bankruptcy
MoneyWatch for December 2009
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Many of us feel the burden of debt within our daily lives, and bankruptcy seems like the only answer, but don’t lose hope. While bankruptcy may seem like a viable option to start over, remember the consequences and remember there are other ways to dig out of debt.
Chapter 7 bankruptcy is total, and stays on your credit report for 10 years. Chapter 13 bankruptcy is considered more of a payment plan, but will stay on the report for 7 years. However, no matter which type is filed, bankruptcy will follow you for life. Anytime you need a future loan, you will have to put it down on the application.
A contributing writer to an online blog, Rachel Strong shares her story and offers the five steps she took to avoid bankruptcy:
1. Find out if bankruptcy is worth it. In Rachel’s case, she found out that only a small percentage of her debt could be wiped away with bankruptcy, so it would have caused more harm than good. Analyze your situation and find out what debts bankruptcy will help. Remember, there are also consequences to bankruptcy, so take those into consideration when making your decision.
2. Make a budget. And follow it! The best way to get out of money problems is to learn what caused them and then how to avoid those patterns in the future. There are sources online, such as the sites below that can help you determine how to make your budget.
3. Negotiate with creditors. Let your credit card companies know what your plans are to pay off the bills either letter or phone call. Also, it might be a good plan to discontinue use of cards until your debt is paid off.
4. Raise (and save) money. This ties in with making a budget: cut down to the bare essentials for awhile, and get rid of things that you really don’t need, via garage sales. Every penny counts and what better way to clean out your basement?
5. Opt for a lifestyle that will help you financially. For Rachel, she and her spouse enlisted in the military, and received benefits through that programming. The key to getting out of debt is being smart with your money. Getting out of debt is a slow process, as many of these stories demonstrate. But, don’t lose hope!
Information from:
davidramsey.com: The Truth About Bankruptcy
thedigeratilife.com: How to Avoid Bankruptcy
More information:
Federal Trade Commission
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Research assistance for MoneyWatch is from Cleveland State University Nance College of Business Administration. Information on the Nance MBD program is available here.
