Filing Bankruptcy as a Last Resort

For many consumers who face an overwhelming debt obligation and see no light at the end of the tunnel, filing bankruptcy may appear to be the only realistic option left. True, for some consumers, the assertion that bankruptcy is the only debt relief option available may be completely accurate. Yet, it is important to recognize the disastrous effects bankruptcy has on your credit, as well as the toll it can take on any consumer who goes through such a draining experience. To file bankruptcy comfortably, any consumer should do their research and be completely sure that it truly is the only debt relief route they can take. The following is a list of the most common reasons why people may feel the need to file bankruptcy, and why we feel those reasons may not be entirely worthy of making such a decision:

To start with a “clean slate” and eliminate the debt

For most consumers, bankruptcy appears to be the only way to avoid the legal obligation of paying off your creditors. Keep in mind that filing Chapter 7 bankruptcy entails the liquidation of all your non exempt property, and Chapter 13 bankruptcy sets you up on a five year installment plan to which you must dedicate all your disposable income towards paying the debt back. Not exactly a fresh start.

To prevent your house from being foreclosed on or a car from being repossessed

True, if filed quickly enough, Chapter 13 bankruptcy can prevent your car or house from being foreclosed on or repossessed. However, the payments you missed will be included into your installment plan, and it is likely that since you filed bankruptcy you will not be able to afford those monthly payments anyway. Consumers may be kicked out of an installment plan for missing just one payment, putting you right back to where you started- knee deep in debt.

To stop creditor and collections harassment

While the collection tactics of some creditors and agencies may be very irritable to deal with, it is no reason to fold your cards and perceive that filing bankruptcy is your only solution to get that harassment stopped. Both debt settlement companies and credit counseling organizations can help you reduce the annoying calls and notices you are receiving without having to file for bankruptcy.

To prevent your utilities from being shut off

Yes, filing bankruptcy will prevent the lights and hot water from going off. No, that doesn’t mean those payments will not be included in the installment plan and that you will receive those services for free. Most utility companies won’t shut off their services for several months of not being paid anyway, so save up over a set period of time and make the monthly payment when you can in order to catch up.