Never look at filing for bankruptcy unless you absolutely have to

Sometimes, crushed by a giant figure of debt, we end up feeling overwhelmed and of the opinion that there is no way out other than simply filing for bankruptcy. But you’d be wrong. Of course, bankruptcy is a way out of debt. But as with any decision, there are long term consequences that must always be kept in mind. If you are considering filing for bankruptcy, there are two things that you must keep in mind. The first thing is that filing for bankruptcy under any statute is not a ‘get out jail free’ card. It doesn’t just wipe your slate clean and let you walk away. The damage that has been done cannot be undone. The second thing is that you should try to pay off as much of your debt as you can, meaning a payment plan must be adhered to.

Yes, bankruptcy does have its “benefits” if you wish to put it that way, but it mangles your credit rating so badly that you are basically ineligible for most loans. And even if you do get a loan it will be at such an exorbitant rate as to make it seem like daylight robbery. And the worst part of it all? Your credit rating will be damaged by bankruptcy for a period as long as ten years. Sure, you can try to fix that credit score one way or another. But it’ll be almost like trying to scale Mount Everest using nothing more than two ice picks; it’s an almost impossible (and wholly unenviable) task.

Thus, using bankruptcy as a backup plan would be absolutely fool-hardy. Just filing for bankruptcy and believing everything will vanish away as if it were a bad dream is plain stupid, because that’s not how it works. Instead of simply filing for bankruptcy, try to restructure your debts so that it can be repaid to as great an extent as possible. Talk to your lenders and let them of your financial difficulties and willingness to try and reach some final settlement by way of compromise. You’d be surprised by how agreeable they are to your request, but the fact is they’d rather lose only some of their money as opposed to losing all of their money to your bankruptcy claim.

For more information: SuperCFO.