If you’re drowning in debt, the temptation may be just to throw up your hands, walk away from it all, and declare bankruptcy. That is TRULY only a last resort, for numerous reasons. One of those reasons is that it’s not that easy to start over with a clean slate any more. An onerous law called the Bankruptcy Abuse Prevention And Consumer Protection Act of 2005 makes it very, very difficult for consumers to discharge their debts. It forces debtors into a debt repayment plan that runs for up to five years and barely allows consumers to keep a living wage during this period, in which the debtor must pay the vast majority of their disposable income towards a debt plan they have little control over. Bankruptcy also remains on one’s credit report for up to 10 years, AND if an employer or mortgage or auto loan company asks if you have ever declared bankruptcy, of course you must answer truthfully. So that means that in some ways, bankruptcy remains on your record forever. And bankruptcy is not guaranteed to discharge your debts. You still must pay income tax, you still must pay child support, you still must pay student loans, and there are many other debts that you are required to pay. This is not to say that you should never consider bankruptcy under any circumstances. You should consult with a qualified bankruptcy attorney before you do so, though, and be completely honest about your circumstances and your prospects for earnings in the next few years. You also should do online research before you even go speak to an attorney, so you can make the final decision yourself. You should know the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy, find out exactly how long each type of bankruptcy will remain on your credit report, and learn what kinds of debts you will continue paying. You should get a realistic view of what life will be like after you declare bankruptcy. Chapter 7 basically means handing over all property not exempt from bankruptcy proceedings so it can be sold off to repay debts. There is no repayment plan. It stays on your credit report for 10 years and these days, with the new bankruptcy laws, many people who aren’t earning that much money find that their income still is too high to qualify. Chapter 13 involves a repayment plan and stays on your credit report for 13 years. So before you make a decision that will affect your life and your credit for decades to come, do your research, find out whether it is worth declaring bankruptcy, and consider trying to design your own debt payoff plan - one that YOU have control over.
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