We have all had months where money is stretched thin. When we experience these issues, we know that we may have to cut costs to find a way to pay for necessities. If we fail to take these steps, we may find ourselves trapped in a difficult pattern. These struggles can quickly lead to more financial problems down the road if we are not careful.
People are often afraid to seriously consider filing for bankruptcy because of the negative impact that it will have on their credit score. Instead, they try many other potential solutions to their financial problems while continuing to accumulate debt. This may include working with debt relief companies or negotiating with their creditors to try to reduce their debts.
In many cases, these efforts do not allow the individual to resolve the challenges that they are facing. They may be living off of their credit cards, leaving them with high minimum payments each month. If they are unable to pay down these balances, the debtors may discover that this may also have an impact on their credit ratings as well.
A person's credit score is based on several factors, which include paying debts on time, as well as the amount of debt that they currently have. Those individuals that are making minimum payments on credit cards, even if paid before they are due, could still see their credit ratings negatively impacted.
Debtors in this position may wish to consider some of the benefits that filing for bankruptcy will provide. When filing for Chapter 7 bankruptcy, the individual's dischargeable debts are eliminated after a one-time payment. This includes most credit card debts, as well as medical bills.
Other individuals may wish to consider filing for Chapter 13 protection. This type of bankruptcy is especially beneficial to homeowners that want to remain in their homes. Chapter 13 bankruptcy helps individuals create a payment plan, where debts are repaid over a three- to five-year period.
Both types of bankruptcy provide immediate help to individuals facing severe financial hardships. When a person files for bankruptcy, there is an automatic stay that puts an end to any lawsuits or collection actions that are in process at the time of filing. This allows the debtors to develop a plan that helps them get back in control over their finances.
If you are having difficulty meeting your financial obligations, speak to an experienced bankruptcy attorney about any of the concerns that you may have. Once you understand the advantages of filing, you make can an informed decision about whether or not bankruptcy is right for you.