Some Misconceptions About Filing For Bankruptcy

A few years ago you could buy a house that was worth a lot more than you could afford to comfortably pay for

. Some people figured why not, with decent interest rates and even loans that extended up to 40 years, the payments really seemed reasonable. But then maybe you got laid off or fired, then things all of a sudden changed. Many got used to a more comfortable lifestyle and even had lots of credit card debt on top of this. But now they are in a position where they owe a lot more each month than they can afford to pay. This unfortunate situation can happen to anyone at any time, and if it does you can believe that all your creditors will be waiting in life to take big bites out of you.

I'd like to go over some misconceptions people feel when they are considering filing for bankruptcy. One of the biggest is that they will be on the streets with nothing at all. This varies for each state but in the state of California if you earn under $45,000 per year you are eligible to file for bankruptcy. This means you can still file and get rid of all your debt and still be fairly comfortable. Also many people don't know this but you are allowed to keep one dwelling and one car. Bankruptcy is a check and balance program within our financial system that protects the consumer from predatory lenders and excessive debt. Yes we are responsible for out debt to an extent, but in life things happen and sometimes our financial situation is such where we get conned into getting into such extreme debt, that we can't save any money or in some cases can't pay it back period. Bankruptcy is designed to protect people like this.

Another misconception about bankruptcy is that your credit will be ruined forever. This isn't true, as it only affects your credit for 7 years. And usually it only lowers your credit score by about 50-75 points, which means in most cases you can still go out and purchase a house or a car afterwards, but you may end up paying a higher interest rate because finance companies might not trust you quite as much as someone who never filed. Ironically people receive offers for credit cards, sometimes within months after they won their bankruptcy case, by the same companies the customer defaulted their loans with.

The reason is that credit card lending is big business and the companies have calculated that the customer will pay more in interest than their original debt was worth before they file again. The banks know the customer can't file for bankruptcy again for 7 more years, so they figure if they can hook them again they have no way out and the banks can put a lean on their bank accounts and take civil action against them this time. People think that credit card companies want consumers to be responsible with their money and this is also not true. If consumers were responsible they wouldn't have gotten the card in the first place. As a consumer if you are going to get a credit card only spend on bare necessities and try to pay it all back when you get your next paycheck.

I wouldn't recommend using it for vacations, home improvements or anything you don't absolutely need to survive. This is how they hook you. You might think who cares it's only a $150.00 per month minimum payment if I borrow $10,000 and this is what they want you to think. The average person could avoid filing for bankruptcy if they only had $300.00 per month of disposable income. So $150.00 per month is a big burden and the banks will be happy to collect it from you for the next 30 years if you can't find a way to pay it back quicker. If you can't, you can always file for bankruptcy, it's nothing to be ashamed of. I promise you the banks and CC companies are worse crooks than you'll ever be.

by: BrianGarvin

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