Filing bankruptcy is a major financial decision requiring careful consideration. Don't be pressured by others, including attorneys you've contacted, until you've answered these questions.
- Do you have a regular source of income? If you have regular but reduced income, attempting to rework cash flow through a mortgage loan modification, home equity loan or requesting repayment plans from credit card companies may save legal fees and reduce negative impact on your credit scores.
- Have you attempted to make repayment arrangements with creditors? Mortgage companies offer a variety of debt solutions for assisting homeowners experiencing financial hardship. Asking for help from your creditors may provide temporary forbearance or reduced payments for a specified time.
- Can you afford or qualify for a home equity loan or line of credit? Homeowners can benefit from low cost home equity financing for consolidating multiple high cost credit card debt. You'll need sufficient home equity and income for borrowing against your home.
- Do you understand the consequences of filing bankruptcy? Bankruptcy appears on your credit reports for ten years and can reduce your credit scores by more than 100 points. You will forfeit all of your active credit card accounts, and can expect problems with getting new credit after your bankruptcy is discharged. You'll also incur legal fees and costs that could have been paid toward your debt.
- Have you discussed your financial situation with a credit counseling service? Certified credit counseling agencies work with borrowers and their creditors for finding affordable payment plans for credit card and other unsecured debt. Trained counselors can evaluate your circumstances and discuss options along with "pros" and "cons" for each debt relief method.
Your answers to these questions help with deciding whether or not filing bankruptcy is the best among available debt solutions.
About the Author:
Karen Lawson is a freelance writer with 20 years of experience in mortgage banking, mortgage loan servicing, and home loan loss mitigation programs. She holds BA and MA degrees in English from the University of Nevada, Reno.