A lot of times, people end up becoming bankrupt. Let’s admit that it is a tough economy. Whether they lost their job, or they failed in their business venture, these are some of the most common scenarios that made people become bankrupt. In 2008, a lot of people from North America were forced to file for bankruptcy for several reasons. Not only did they lose their buying power after losing their job, they also became victims to the housing bubble.
If filing for bankruptcy ever crossed your mind, it is important that you know a couple of things first. Here are some considerations that you want to make.
Long term consequences
You need to make sure that you know exactly the long term consequences of your action. If you decided to file for bankruptcy, keep in mind that this will affect your ability to get a loan. And also, you may start back from scratch. Always make sure that you crunch the numbers and exhaust all options first. Filing bankruptcy can be a serious decision.
Is there another way out?
A lot of people find it hard to get out of their debts. However, there are instances when small adjustments can go a long way. Can you get a second or a third job? During worst case scenarios, even consider borrowing money from your family members. At least, you can keep your credit score intact. Can you cut on your expenses? If you are serious about your options, you can talk to a credit counselor.
Know exactly your options
There are two types of bankruptcy options. You can either go for chapter 7 or chapter 13. What is the difference between the two? Chapter 13 is typically called the wage earner’s plan. Here, you can pay part of your debt. Chapter 7, on the other hand, allows you to cancel all your debt in the past three to six months. Yes, both have an effect on your credit score.
Also, make sure that you know the details. There are some debts that can’t be removed. For instance, child support is something that you have to deal with despite being broke. Student loans should also be paid.
If you are looking for a way out, you need to make sure that you exhaust all your options first. Try to study your situation and even ask the help of experts in the subject matter. Most of the time, you can find a better way than going for bankruptcy.