The Basics of Insolvency
Bankruptcy can be a scary experience. That being said, most of the people who come to me usually have a pretty bad credit score already. The most common reasons why you want a good credit score (besides status) is the low interest rate you can get on your car or house. These are oftentimes the most expensive items that a person will purchase in his life, and a quarter (.25) of a percent can make a huge difference on a thirty year mortgage.
That being said, bankruptcy isn’t really that bad – especially Chapter 7. It only takes about three months, and two months of that is waiting. It usually requires one court hearing which lasts roughly five minutes. The worst part really is the decision to do it, and the document gathering for your attorney.
All your debts are generally discharged – common exceptions include child support and governmental fines. Income Taxes are even dischargeable under certain conditions. (the first being that they have to be more than three years old)
Most people can take years to pay off their debts whereas bankruptcy can give you a fresh start in about 90 days. After the filing your credit score will drop to about 590 or so, the average score of the person that I meet BEFORE they file.
Now, if you’re current on all your payments and haven’t missed any payments in a few years, debt negotiation may be a better option for your, especially if you are only struggling with one primary debt. In these situations, the threat of bankruptcy and negotiations with a bankruptcy attorney can often get the creditor to soften their demands.
All in all, bankruptcy isn’t so bad, but obviously each person is different and it will eventually depend on your situation.