Debt And Bankruptcy Do Not Have To Go Hand In Hand

Category: Finance.

The two most severe forms of financial trouble that most consumers can imagine are foreclosure and bankruptcy.

A homeowner may lose the house through foreclosure and avoid bankruptcy, a person may, and likewise go through bankruptcy court while managing to keep his home. These two events often happen together, but it is not necessary that they do. The issue of bankruptcy becomes a real threat when consumers find themselves in deep financial trouble that is often caused by a serious personal event such as an illness or loss of job. In many cases, this is the reason households find themselves so far under that they cannot get out without help fro the courts. A second way that consumers can find themselves threatened with bankruptcy is through careless borrowing. One of the main sources of trouble for many consumers is credit card debt.

Unlike any other type of loan where we have to go to a bank or credit union and fill out application papers and then be granted the loan, a credit card is simply handed over to a merchant and that s that. There are many reasons for this, but perhaps the most logical is the ease of use that credit cards afford us. Credit card purchases are loans. Regardless of the size of the purchase, in fact, the purchase is, being paid for by a loan. They may be small in nature, when a cup, say of coffee is purchased, or they may be large. These loans have some of the highest interest rates on the market, and so it is not uncommon for many consumers to find themselves in deep water when the bills come due.

In the past, filing for bankruptcy was pretty easy and straightforward. Bankruptcy laws have changed dramatically over the last few years. Today, it is much more complicated and the protections that consumers receive from the courts have changed as well. Some of the newer laws may impact you more than you imagine. Anyone considering bankruptcy would do well to consult with a qualified attorney before filing. For example, most people who wish to file must first take mandatory credit counseling classes. There are also new laws concerning unpaid child support and alimony.

There is also a new" means test" being used that will prevent some consumers from being able to file for Chapter 7 bankruptcy. In addition, there are fewer" automatic stays" allowed. The above are just a handful of the new rules pertaining to bankruptcy. These automatic stays were once very common but today they are fewer and they are more inclined to favor the creditor than the consumer. These rules took effect in 2005 and they are law now so there is no getting around them. Be being careful with the debt that you take out, and by making sure that you pay your obligations when they are due, most consumers can avoid bankruptcy.

Debt and bankruptcy do not have to go hand in hand. Once a bankruptcy proceeding takes place, consumers should understand that their ability to get future credit may be significantly decreased. This is not the case anymore. This is in opposition to some of the old myths that once a consumer was free and clear of debts through bankruptcy he or she was given preferred treatment by new lenders.

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