In these tough economic times, many people look to bankruptcy as a way to solve their financial problems. Declaring bankruptcy can certainly give an individual or a family a fresh start by either eliminating debts completely or establishing some sort of payment plan.
If you find yourself in really tough financial circumstances, you should really give some consideration to declaring bankruptcy without making a hasty commitment one way or another. Too many people avoid this option at all costs only to find that they have made the situation worse.
Even so, you cannot enter into this kind of decision lightly. If you decide to go with chapter 7 and try to eliminate all of your debts, you have to remember that this will stay on your financial records for a number of years. It doesn't mean that you will never be able to rebuild your credit and get on with your life, but it does mean that you should look at other options carefully before taking the financial leap.
What other options do you have besides declaring Chapter 7? Well, obviously the best route to take would be to avoid your financial predicament altogether, but chances are if you're reading this article then it is already too late to prevent all of your financial problems. This doesn't mean that you have to panic, but you just have to look at things a little more closely.
The first option to consider is to take a loan from a family member or friend. If your relative has the financial means and is willing to help you out, then you should not be too proud to accept this since it can help you avoid further problems. However, think carefully about this option. If you're unable to repay the loan, you could bring on some serious personal strain into your family life (in addition to the financial problems that you already have).
Another option you have probably heard of is a home equity loan. The process is simple enough. You simply get a bank to make you the loan based on the equity in your home, and then you use this cash to pay off your financial obligations. This can be a great way to avoid declaring chapter 7 while still being able to pay off all of your credit card bills, medical bills, or any other lingering financial obligations.
Unfortunately, if you don't pay off a home equity loan for any reason, then the bank has the right to take your house! This is the danger of taking advantage of this kind of loan, and in many cases the loan amount would not be enough to cover your debts anyway. The worst-case scenario would be for you to take out a home equity loan and then have to declare chapter 7 anyway a few months or years down the road.
Bankruptcy is designed to protect debtors who are in over their heads, and in most cases your home will be protected when you file. So think carefully before taking out a home equity loan which would put your home in danger. You'll want to make sure to address your spending habits as well. Otherwise, you may use up the equity in your home only to accumulate a huge amount of credit card bills once again within a few years.
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