ne of the biggest myths is bankruptcy law that went into
that if you file for effect in October 2005 states
bankruptcy you will be that debtors (consumers) who earn
financially free and no longer less than the median income in
have debt problems. Wrong! their state - about 80 percent of
Bankruptcy is not the cure-all those who file for bankruptcy -
for getting out of debt. Over 1 still would be entitled to file
million Americans file for under Chapter 7. But those who
bankruptcy every year. One in earn more than that and who have
every 73 households files for the ability to repay at least
bankruptcy. In 2005, 2 million $6,000 over five years would have
Americans filed for personal to file under Chapter 13, which
bankruptcies. requires a repayment plan.
Millions of Americans are in debt
Although it is true that after
and get in debt every year. Many you file for bankruptcy you can
people think that filing for purchase a house or a car, what
bankruptcy will solve all of people don’t realize it that the
their debt problems. On the interest rate that you will be
surface it seems that if you file given will be very high. Also,
for bankruptcy all of your debt based on the new bankruptcy law
will be eliminated and you can implemented in October 2005, it
start with a clean slate. is harder to file for bankruptcy
Actually it is not that simple. and depending on the type of
bankruptcy granted, it will
To file for personal remain on your credit report for
bankruptcy you must reside in a seven to ten years. This greatly
state for 90 days prior to filing lowers your credit score and it
and have a total unsecured debt will probably take about 3 to 5
less than $290,525 or secured years before you score increases
debt less than $871,550. The new due to the bankruptcy filed, and
provided that you don’t get into Your liabilities are anything you
any further debt. owe money on such a house,
When you have financial investment property, boat, car,
problems and can’t see any way etc. This will help to determine
out, bankruptcy looks like the if you have any assets that can
best option, but there are many be sold or money borrowed against
other options available to you. to pay off your debts. Next you
If you have a house you can take need to create a budget for
out an equity loan to pay your yourself to identify how much
debts, you can reduce your money you have coming in (how
expenses and create a budget for much you get paid each week) and
yourself, you can get a part-time how much money you have going out
job, go to school and further (how much you pay each month in
your education and get additional bills and expenses).
training related to your
particular job, setup payment If you have very little or no
plans with your creditors or sell assets then you will need to do
some of your assets if you have some quick fixes such as cutting
any.
back on expenses including:
The best consumer is an bringing your lunch to work,
educated consumer. If you find carpooling, catching the subway
yourself in financial troubles, or bus to work, riding your bike
the first and best thing to do is or motorcycle to work, eating
do research and find out the breakfast at home, renting videos
options available to you. Next instead of going to the movies or
you want to identify your assets cutting back on how often you go
and liabilities. Your assets are to the movies, canceling your
anything that you do not owe pager or cell phone service or
money on such as stocks, bonds, switching to the cheapest plan
401(k), retirement plans, etc. available.
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About the Author:
Harrine Freeman is the CEO of H.E. Freeman Enterprises, a credit repair and personal finance services company and author of "How to Get Out of Debt: Get an "A" Credit Rating for Free." Visit H.E. Freeman Enterprises
