There Are No Guarantees That Bankruptcy Will Solve Your Debt Problems

Advocates of bankruptcy will sell the most popular aspect of this decision: your creditors will leave you alone. But this peaceful period will not last for long and the hassles of one bankruptcy filing could go on for years. There is more expense involved, your case will be under much scrutiny by the ones you can’t pay, and they will be looking for ways to get some of your exempt property into a non-exempt status and up for grabs. It is much better to figure out a way to settle with your creditors instead of using bankruptcy as a solution. Here some reasons why bankruptcy probably will not solve all of your debt problems:

Not all of your debts can be discharged through bankruptcy. Debts such as child support, alimony, taxes, spousal support, debts for personal injury caused by the debtor under the influence of drugs and alcohol, and debts incurred by fraud are not dischargeable. And not only can all your debts not be discharged through bankruptcy but even some that do get discharged can have their discharge revoked by the court. In fact, a creditor can petition the court to revoke a discharge if it discovers that the debtor obtained some property that was not disclosed as part of the debtor’s estate. In simple terms, if the debtor said they had nothing to pay a creditor yet the creditor knows of some non-exempt asset you have, the creditor can petition to have the discharge revoked. Would you really want that level of micromanagement on you? It basically means you lose your freedom to prioritize your debts and make sure your creditors get paid in an organized manner. This is where a debt management company can help.

Bankruptcy is not a financial planning tool. If you don’t address the source of what caused you to go into bankruptcy you will inevitably repeat it again. But you claim that you need to file for bankruptcy because of events out of your control? While this is probably true, there are no guarantees that these same events happen to you again causing you to seek bankruptcy once more. And the next time you want to file for bankruptcy, it will be a quicker and easier decision for you because you have already survived it once. This is when people are using bankruptcy as a financial tool instead of something to be avoided. The financial tools they should be using are budgeting, saving, making more money to pay down debts, and negotiating with creditors or arranging lump-sum settlements.

Smooth sailing after bankruptcy is a myth. If you were able to keep your home through a Chapter 13 Bankruptcy then you now must ensure you keep up the payments. One payment missed and it can be foreclosed. So what happens if you lose your job or have a medical disaster? The Bankruptcy Reform Act of 2005 increased the time spans you must wait before filing another bankruptcy. Plus, there are rules about transfers of assets you did prior to filing the bankruptcy that can come under scrutiny even after the filing. If the debtor fails to turn over exempt property or if the trustee objects to the exemptions then more meetings, communications, filings, and just general chatter takes place once more. All this even after the filing for bankruptcy has been entered.

Now you have this mark on you that even if others don’t know about it, you do. Most people would like to think they took action and it made a difference. Most are of the mindset that even if they fail, at least they tried. But this is not so with bankruptcy if one uses it without exhausting every effort to avoid it.