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Bankruptcy - how it can create a negative effect on you and your future

by Wayne Wargo (PenWay.org)

Facing bankruptcy is a harsh reality. Unfortunately, it may be the only available option. Going through the bankruptcy process is sometime disheartening. It will affect you and your future. You will most likely have to hire an attorney that specializes in this field. Fees can range considerably from one firm to another. Make sure you check their track record. If you decide to file for bankruptcy there is a lot you are going to need to know and expect. Bankruptcy may be just what you need to rebuild your credit and get a fresh start.

Bankruptcy is the legal process that normally discharges most of your debts, but also has the distinct disadvantage of making it more difficult for you to borrow in the future. The United States constitution guarantees its citizens the right to debt relief through bankruptcy, which can provide a new beginning and, with prudent budgeting and financial practices, a second chance at life and success.

Understand that even though a filing of personal bankruptcy will create serious problems for you in the future, it is also a voluntary acceptance and declaration of your debts. Personal bankruptcy is a step towards healing your financial problems. The two most common types of bankruptcy are chapter 7 and chapter 13. Chapter 7 bankruptcy is a liquidation code that gives you the ability to erase most of your debts by forfeiting assets to creditors. Chapter 13 bankruptcy is a reorganization code that lets you pay off debts during a three to five year time span, but doesn't require you to forfeit any belongings or assets to pay unsecured debts.

There are, of course, a myriad of reasons why a person may file for bankruptcy. Such events such as getting laid off from a job or paying for divorce proceedings are common as is the death of a spouse or loved one. Any of these factors have the potential to spell disaster for your finances.

Entering into bankruptcy can help to alleviate your debts, but it will also affect your credit rating and your ability to borrow money in the future. Too many times people that file for bankruptcy do not understand the long-term financial implications and live to regret it. To see if your creditors can help you, give them a call and explain that you're having trouble with your finances.

Persons facing personal bankruptcy have to put up with nagging debt collectors. You will learn quickly of the impact of personal bankruptcy. Apart from the obvious financial worries associated with personal bankruptcy, it can be humiliating to feel totally un-trusted by everyone. Weeks or even months of red-letter demands, sleepless nights, and fears about the future all wreak havoc with your sense of well-being. A debt collector may not contact you at inconvenient times or places, such as before 8 in the morning or after 9 at night, unless you agree to it. And collectors may not contact you at work if they're told (orally or in writing) that you're not allowed to get calls there.

For many people, bankruptcy causes stress, depression and weighs greatly on their mind. You have to be very careful with the paperwork that needs to be completed. If you make a mistake, even an honest one, you may risk repossession or liquidation of your home and other assets you're trying to protect. Make certain that you list all of your assets and liabilities, including such things as child support, wage garnishments, etc., since omitting some assets on purpose may lead to criminal charges.

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Bankruptcy - how it can create a negative affect on you and your future