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Bankruptcy – Things You Need to Know

Are you considering filing for bankruptcy? Before you do, here are some very important things you must know.

Don’t make the decision rashly.

Make sure you take time to educate yourself about the proceedings. Bankruptcy will impact your credit for ten years down the road, so it’s by no means the “clean beginning” many view it as. And in some instances, you still have to pay off your obligations.

Before you decide, you need to determine what possessions you will be allowed to retain, which ones will be liquidated, etc. In some instances, you might even lose your job, and you need to factor all this in.

What chapter will you file for?

This is the first thing to think about, and it makes a big difference. Should you be earning higher than the average income of a comparable family in your state, you won’t be allowed to go for chapter seven.

This is where your debts are completely wiped out and is the one most people would prefer. Your only choice would be to go for chapter thirteen, which is a repayment plan, mainly because you have the income to make it work.

In this case, you are given a trustee who determines which of your things must be liquidated in order to cover your obligations. In most instances, you can retain your residence, but some areas will take this as well.

But you might not have to file.

First, you need to think over your money situation long and hard. There are options and think about whether you have sufficient cash flow. Suppose you can only make the lowest payment possible and constantly use your credit card because you don’t have money available. In that case, bankruptcy may be something to consider since you will run out of credit line sooner or later.

If things are still relatively manageable, here are there effective alternatives to bankruptcy:

#1) Track your spending

Take a long and hard look at your spending habits. This shows you the primary places your money is disappearing, which will help you figure out where you need to get it under control.

#2) Get credit counseling.

This sometimes helps you lower your obligations. But these companies will only work with you if you have a certain level of income.

#3) Get a debt consolidation loan

In many instances, getting a secured loan against your home is smart because this will give you the cash flow you need to pay down your credit cards. The risk, of course, is that your home will be repossessed if you can’t make your payments. But if you’re sure you can make the repayments and are committed to it, this may be a smart option to consider.

The bottom line is bankruptcy should be your last resort. Make sure you have no other avenues available. Only then should you file.

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