Top reasons on why to shun from a bankruptcy proceeding!

Most debtors who have a large amount of debt that they are struggling to pay off, at one time or another have contemplated the option of going bankrupt. In this brief article I am going to give you a couple very serious reasons why you should avoid a bankruptcy proceeding at all costs, if you can. Many debtors don't realize the devastating negative shock a bankruptcy can have.

1. A bankruptcy proceeding has an severe negative impact on your credit score and becomes a permanent public record!

A bankruptcy proceeding is one of the nastiest negative remarks that can be logged on a credit report. Thus making any more credit you try to get extremely difficult, and if you do receive credit it usually comes accompanied with a seriously elevated interest rate. Plus, it will stay on your credit history for up to 7-10 years. Even once it is removed from your credit history it remains a public record for the remainder of your life. So whenever you try for new loans at any point in the future, when they ask whether you have ever filed bankruptcy to avoid breaking the law you must answer yes.

2. Brand New Bankruptcy laws in 2005!

In 2005, our government approved a piece of legislation which makes anyone filing for a Chapter 7, which will wipe the plate clean of all your debts much harder. Basically if you have an money and a home than most assuredly you will go through a review to determine if you should go through credit counseling first for at the minimum 6 months. According to NFCC close to 80% of debtors who try can not abide by the very regimented guidelines set from the creditors to finish the program thus throwing them back into the bankruptcy filing. That's when Chapter 13 comes into light which is a method of personal bankruptcy in which the judge will determine how much you will pay back each creditor you list based on your financial situation.

3. The judge will control your income with a Chapter 13 Proceeding!

Prior to the new law being approved in 2005 many debtors that would have been able to claim Chapter 7, were now made to go Chapter 13 instead. Chapter 13 requires that you go over with the court and show to them all of your finances. You must show all streams of income and assets. The court will review your expenses compared to your income and then determine how much money you will have to deal out each month. The court decides this for you, leaving you with no say in this process. If you have liquid assets such as a house they can force you to sell them off, within State law, to pay off your debt. There are scheduled reviews every year and if your income increases you must tell this to the court, this could bump up the amount you pay back. If you have two family cars you could have to sell one to pay down the debt. They for lack of better words tell you what you can do with your income. If you have the higher costing cable you will be forced to cut down to standard cable, if you eat high priced steaks every day you will need to cut back to cheeseburgers. This could be a extremely painful and embarrassing proceeding.

These are all very negative proceedings that debtors should be made aware of before meeting with a bankruptcy lawyer. Many attorneys will down play these negative facts of bankruptcy. Bankruptcy is available for a purpose and for some individuals they have no other method available to them and must file bankruptcy, however many individuals go into bankruptcy unnecessarily. A very nice alternative option to bankruptcy is credit card debt settlement. With debt settlement in many cases you will save way more money than you could have through a Chapter 13, besides you will get out of debt faster as well, and not undergo the multitude of negative consequences of a bankruptcy proceeding.

Steve Bis is a credit card debt analyst with the US Consumer Advocate, which practices in debt relief.