Most debt problems don’t go away and solve themselves. They are there when you go to bed at night, and they’re still there when you get up in the morning. They can cause a lot of ulcers, sleepless nights, stress and even physical sickness. As a bankruptcy attorney for the last 22 years, I have seen the devastating effects of serious debt problems on people’s personal lives, their businesses, their families and their marriages. What I have also seen is that a lot of these effects could have been avoided with proper planning.
Facing serious debt problems often causes severe anxiety and fear about the future. What will happen to me and my family if I get sued by creditors? Can they garnish my wages or freeze my bank accounts? Will I have enough to buy food, pay my rent or mortgage, and keep my head above water?
The worst thing that you can do when you are in this situation is to pretend that everything is OK until one day your situation becomes a financial emergency. You have probably heard a lot of negative things about bankruptcy. Maybe you’ve heard from others that you will never be able to buy anything on credit again. But what if I told you that on average, people who file bankruptcy can rebuild their credit in as little as 3-4 years? That’s right. Although it can be reported on your credit for 7-10 years, the effects of bankruptcy rarely last that long unless you allow it to happen. Bankruptcy is a beginning, it’s not the end of the world.
After bankruptcy, there are positive steps you can take to rebuild your credit. Most people who file bankruptcy have a tarnished credit rating anyway due to late payments, collection accounts, lawsuits, etc. on their credit report and as long as they remain delinquent, creditors continue to report them to the credit bureaus month after month. Filing bankruptcy stops the reporting of negative information. While payment history accounts for 35% of your credit score, 30% accounts for how much total debt you owe. If bankruptcy wipes out most, if not all your debts, your debt to income ratio improves over time.
Filing for bankruptcy protection automatically stops all creditor actions such as harassing phone calls, collection letters, lawsuits, wage garnishments, foreclosure and repossession. Generally, there are 2 types of bankruptcy for individuals. You can either wipe out debts you can no longer pay (Chapter 7) or you may consolidate all your debts into one low monthly payment and pay your creditors based only based what you can afford (Chapter 13). Which chapter is right for you will depend on your income, expenses, assets, and your objectives in filing, among other things.
Bankruptcy relief can be your first step in rebuilding your finances, your credit and your life. Remember that your past doesn’t equal your future. You have the power to change your life by taking action now. If you have not read my book, “What You Need to Know Before Filing Bankruptcy”, you can download it free of charge at www.beforefilingbk.com. None of the information herein is intended to give legal advice for any specfic situation. Laws can be complicated and if you are unsure about any of the legal aspects of your case, you should consult with legal counsel who can thoroughly evaluate your situation. Ray Bulaon is a bankruptcy attorney in Valencia who has successfully helped more than 5,000 clients in getting out of debt. To request a free consultation, call 866-477-7772 or 661-775-4880.