Should I File Bankruptcy?

Many of us have heard stories of someone who irresponsibly maxed out their credit cards by going on shopping sprees, buying everything from jewelry, large screen televisions, expensive restaurant meals, extravagant vacations and other luxury items. Then when they reached their credit limits and the consequences of what they had done set in, they responded by just declaring bankruptcy and washing their hands of all their debt. So isn’t filing bankruptcy pretty much of a “get out of jail free card”, and I’m being a sucker by not taking advantage of it too? Why shouldn’t I just declare personal bankruptcy now to get free of my suffocating credit card debt?

Photo by Fotero.

The truth is that many consumers took advantage of the relatively easy requirements to qualify for a Chapter 7 bankruptcy before the new bankruptcy laws were enacted in 2005. Especially in cases where the person filing didn’t own a home or a nice car, filing a Chapter 7 bankruptcy allowed someone with large amounts of debt to wipe them out the next day. Of course there was still serious negative impact to their credit score, but to many critics (credit card companies being prominent among them) this seemed like a slap on the wrist in comparison to the reality they would face if they were forced to work and sacrifice to pay off their debt like other consumers.

Now the new laws force many filers into a Chapter 13 bankruptcy, placing them in a court ordered program of up to five years which puts them on a strict budget to repay their debts. And even if they do happen to qualify for a Chapter 7 bankruptcy, there are more stringent requirements plus new liability for the bankruptcy lawyers, resulting in much higher fees and more difficulty in finding a lawyer willing to file. The best bankruptcy advice is to check your own state bankruptcy laws before moving forward, as they can vary significantly. And remember that you should avoid bankruptcy unless your unsecured debt problems are so severe that even the assistance available through a good debt settlement program would prove to be inadequate.

No related posts.