For those in the middle of a financial crisis, there is at least one other credit solution available apart from bankruptcy. There are generally no rules for people to follow to decide on which options are best for their specific financial situation. Such a decision is personal and one that should be made based on some factors.
Eligibility for Bankruptcy
Towards the beginning of this legal process, the courts review all of the income, debts, and assets of the applicant. Judges have the authority to dismiss the case of individuals believed to have the capacity to pay their debts in some way and are, therefore, ineligible for bankruptcy. That often happens with employed individuals who file due to the accumulation of personal or credit card debts.
The entire process involved can also be costly. The cost is among the most obvious reasons why applicants should be sure that they are eligible before actually filing for bankruptcy. If a judge dismisses their case, they would have spent hundreds of dollars on something that will not help them with their financial situation. This is also among the most common reasons why consumer credit counselors often tell their clients that this process should be done only after every other possible credit solution has been considered. Such counselors may even recommend that their clients sell their assets before considering filing for this process.
Credit Implications of Filing for Bankruptcy
The implications of filing for bankruptcy will last for ten years, and maybe even longer. It is stated on credit reports and will most likely still come up when applying for credit or other financial accommodations years later. Furthermore, the public has access to such records and so anyone can find out about a filing.
Since a case of bankruptcy makes its way to public records and credit reports, it affects the individual’s ability to gain insurance, credit, and possibly even employment in the future. That is the reason why when individuals are thinking of filing for this process, they should first make sure that all of their other options and the repercussions of filing before finalizing their decision.
Another repercussion of filing for this legal process is that debtors will most likely be stripped of their personal assets. Things that have been purchased with a loan might have to be surrendered to the trustee in order to begin paying off their debt. Cars, furniture, and other items will have to be handed over to the trustee as well. Furthermore, student loans and child support will not be considered in a bankruptcy case, so debtors will still have to pay such obligations off no matter what the judge’s decision is.
Finding an Alternative Credit Solution
Debtors who have stable jobs that pay sufficiently can consider some other credit solution before bankruptcy. Among the best options to consider is debt negotiation wherein debtors propose new, more manageable repayment plans to their creditors. Individuals may want to pursue this on their own or may choose to engage the services of a consumer credit counselor to assist with the negotiation process.
Credit counseling may also provide tons of benefits, especially to debtors who are not very familiar with ways to manage their personal finances. Generally, such counselors provide their clients with recommendations on monthly budgets based on their income in order to eliminate the debt that they have accumulated without having to go through the process of renegotiation. They will also be able to provide expert advice on which assets their clients should consider liquidating to eliminate debt.
Apart from formal credit solutions, debtors may consider making some lifestyle changes in order to free up some money to pay off the debts that they have accumulated. If they have the time available in their schedule, they may even consider temporarily taking on a supplementary job until such time that they eliminate their debt.
Filing for bankruptcy is a very personal decision and one that should not be taken lightly. Those who are thinking of doing so should understand not only the implications but also alternative credit solutions before they decide to file.