When many people think about the prospect of filing for bankruptcy, one of their primary concerns may be how the filing will affect their financial future. There are many tales of bankruptcy causing financial ruin and the difficulty of rebuilding a solid financial foundation.
Many of the stories that circulate about bankruptcy ruining your finances are actually not based in fact. The truth is that a bankruptcy filing may actually be the most positive step you can make, depending on your particular situation.
How a bankruptcy filing can help
If your debt is overwhelming you and you cannot make your monthly payments on various obligations, your accounts are likely in the hands of collection agencies. The collection agencies' job is to pursue you aggressively in order to collect on the debts. In addition to this persistent hassle, your credit rating continues to decline for each payment you miss. Ignoring the problem of severe debt does not make it go away, and in fact, worsens the situation.
At this point, it might seem like a bankruptcy filing can only make a bad situation worse. However, filing for bankruptcy can do several things to get the process moving for an improved financial picture. Filing for bankruptcy prevents collection agencies from continuing to contact you for payments. In addition, it halts the late payments on your accounts as you move through the filing process, so your credit record does not continue to deteriorate. In short, a bankruptcy filing signals that you are taking action to resolve the issue.
How to take action
One of the first steps towards taking action to resolve your debt situation is to begin to inform yourself about your options. There are two types of bankruptcy filings that you may consider: Chapter 7 and Chapter 13. The right kind of debt relief for your particular situation depends on the types of debt you currently hold. Consumers typically have loans for cars and homes, and debt also comes in the form of medical bills, taxes and student loans. Not all types of debt are eligible for discharge under a bankruptcy, so it is important to understand what debts you can actually get rid of in a bankruptcy filing.
Taking the first step towards a brighter financial future will likely require some difficult decisions and some hard work. However, the benefits of getting the process started will pay off in the long run, so you can start rebuilding a debt-free life.