First of all, to avoid too much extra info; A bankruptcy is a legal process to eliminate your obligation to pay some or all of your debts. The two most common types of bankruptcy are chapter seven bankruptcy and chapter thirteen bankruptcy. In a chapter seven bankruptcy, you are being released of your obligation to repay most bills, collections, and judgments completely. In a chapter thirteen bankruptcy, you will be required to repay a large portion of your debts, without interest over several years. This is common if you have too many assets to declare chapter seven.
Many people want to get out from underneath many of their bills or collection accounts. Sometimes due to uncontrollable events a person could find themselves with more debt than they can pay back in a reasonable amount of time. Before you declare bankruptcy there are a few things you should asses. First, will it be impossible to get your budget under control without bankruptcy? Many times if you just rearrange this a little you’ll find that with a little sacrifice you can get out of debt in a few years. Second, are you prepared to have a very negative brand on your credit bureau for many years? Once you are out of the bankruptcy you don’t start at the beginning again you start below that, with no positive credit, AND with the black mark of a bankruptcy on your credit. Next, has the situation that caused you to get into all this debt and bad credit changed? If you are still not making enough or still incurring large bills you can’t handle or getting divorced or any other thing that will make it difficult to get through without picking up some big debt, don’t do it. There is no good reason to declare bankruptcy now and then wind up in the same jam later but with worse credit. Finally, are you prepared to change? Many people that declare bankruptcy are in this situation because they were not responsible. Maybe they used credit card too much or bought things that weren’t in their budget, or maybe just maybe they didn’t feel like paying the bill because they wanted to use that money for something else.
So the idea is, you need to be completely prepared for a bankruptcy, it’s after effects, and the road ahead of bankruptcy if you are even going to consider a bankruptcy. Getting into a bankruptcy before you have taken a careful look at the situation will lead you back to the same rut you are in now, maybe even worse.
