Click Fraud Protection

Bankruptcy Isn’t Always the Answer

Westgate Law > Blog > Bankruptcy Alternatives > Bankruptcy Isn’t Always the Answer

Bankruptcy Isn’t Always the Answer

Encino bankruptcy lawyerBankruptcy has saved the financial of countless individuals. Some might even say that bankruptcy has saved the lives of countless individuals. Financial trouble is one of the main causes of stress, anxiety, marital problems, and divorce. It can even be put on the list of cited causes for suicide. Sometimes getting a fresh start without financial burdens can be a lifesaver, literally, but it’s not always the answer.

First consider the consequences of bankruptcy, as they are serious and undeniable. Most see bankruptcy as a tool that simply wipes away all debt (all or most depending upon the situation). This can be an appropriate definition, but it’s only a partial understanding of the process. While bankruptcy is in place as a way to “forgive” debt owed, all other ramifications of filing are negative, especially when it comes to a consumer’s credit score.

Filers will notice that a bankruptcy remains on their credit report for 7+ years. The exact number of years on consumer credit reports will be in direct correlation to the type of bankruptcy filed. For example, Chapter 7 bankruptcies stay on the credit report for 10 years, but the Chapter 13 bankruptcy (the 2nd most common type of bankruptcy) only stays on the credit report for 7 years. Having a bankruptcy on your credit report could prevent you from obtaining any new lines of credit. It could also cause problems when applying for jobs.

While the effect bankruptcy can have on a consumer’s credit score is important to note, it’s also important to note that individuals considering filing have often already damaged their credit significantly through non-payment, late payments, excessive revolving credit, unpaid balances, settlements on past due accounts, etc. In this case, you may not notice a drastic negative effect on your credit report upon filing, particularly if you pay your bills after your bankruptcy is completed.

As a general rule, experts recommend that bankruptcy only be considered as an option if debt is in excess of $10,000. This is due to the fact that bankruptcy, while extremely helpful when needed, is also extremely long term in the potential damaging effects that can occur to consumer credit reports and thus consumer lifestyle.

Consumers who are looking for financial relief from debt and hardship should consider bankruptcy as it discharges a large portion of debt, but there are some types of debt/obligation that bankruptcy won’t typically touch including: alimony, child support, debts that arise post-bankruptcy filing, some debts incurred in the 6 months prior to filing, fraudulent loans, some student loans, some tax balances, debts arising from personal injury while driving intoxicated, debts incurred due to willful or malicious acts/injuries to another person or property, etc.

Bankruptcy also doesn’t protect individuals who co-signed for any of your debts. By definition, a co-signer agreed to pay the specified loan if you did not pay it for any reason. If you declare bankruptcy, then you aren’t responsible for paying the debt. Your co-signer may then still be legally obligated to cover the loan.

Call Westgate Law today to discuss the details of your situation and how bankruptcy may suit your needs.  Bankruptcy isn’t always the answer, but it could be the perfect answer for your problem.

About the Author

Justin Harelik
Justin has a singular goal: to get people out of financial distress and move them to financial stability and prosperity. He does this by combining 15 years of in-depth experience in bankruptcy, credit management, debt negotiation and student loan modifications, and he does it with both English and Spanish-speaking clients.

Leave Comments