Seven Things To Know Before You Go Bankrupt

Bankruptcy is often associated with "fresh start." Because of this general perception, many people tend to think that filing for a bankruptcy is the only solution to solve large financial woes. However, there are at least seven things you need to know before you go bankrupt.

Long-term Ramifications

You should know that filing for bankruptcy has long-term ramifications to your personal life. Bankruptcy stays on your credit report for as long as ten years, making most investors to shut you down. This means that it will be very difficult for you to get credit again to beef up your credit score. You are even required to state your bankruptcy every time you fill up government forms.

Publicized Financials

You should know that filing for bankruptcy also involves making your financial condition open to public scrutiny. You are required to release an extensive paperwork documenting your debts, assets, income, expenses, and all other financial transactions in the past. The meeting with your creditors is a public proceeding.  

Preventive Actions

You should know that bankruptcy is not the only option for paying off debts. Try other preventive actions such as getting a second job and adjusting your budget to increase your income and reduce expenses. Try these steps to pay your debts first before opting for a more drastic measure such as bankruptcy.

Certified Credit Counselor

You should know that you can consult a certified credit counselor who will guide you through debt management programs, budget analysis, and personal finance management. They will help you exhaust all alternatives first before filing for bankruptcy.

Types of Bankruptcy

You should also know that not all bankruptcies are alike. Depending on your assets and income, you will have to choose between Chapter 7 (liquidation), Chapter 13 (reorganization), or Chapter 11 (repayment).  Find the right type of bankruptcy with the help of your bankruptcy lawyer.

Discharged Debts

In direct contrast to the "clean slate" or "fresh start" perception towards bankruptcy, you should know that not all debts can be discharged. In fact, there is a long list of debts that cannot be discharged such as child support, taxes, money owed to the government, etc. Moreover, filing for bankruptcy only protects you as a co-signer for a loan and the creditor will have to collect to another co-signer who can be a close family member.

Expensive Bankruptcy

Finally, you should also know the irony of filing for bankruptcy: it is expensive. Your current financial woes can get even messier with the need to pay for an attorney and to go through the entire process of bankruptcy.

Given these factors, you should realize the bankruptcy should not be considered as the first probable option to fix a financial mess. Exhaust all possible options first and save yourself from the dire consequences of bankruptcy. For more information, contact a local bankruptcy lawyer, such as Thomas K Mast.