Many believe bankruptcy is the quickest and easiest way to get out of debt. But, in reality it’s best to avoid it all together!
According to Investopedia, the primary reasons people file for bankruptcy protection from their creditors are
- medical debt
- job loss
- poor financial management
- unexpected expenses
Bankruptcy is the legal process a person goes through when they can’t repay outstanding debts. An order from the bankruptcy court prevents creditors from trying to collect on most debts incurred prior to filing. However, recent taxes, alimony, child support plus a few other obligations cannot be erased. Anyone owing money on the same loans is still responsible for the debt. You may lose some property, and anything filed in court can be accessed by the public. Plus, if your lender filed a lien on your house, they can foreclose on you if you default on the loan.
Bankruptcy stays on your credit report for 10 years and can cause difficulty when initially trying to rent, get a car loan, or certain jobs. Your credit score may plummet, but can be rebuilt over time.
The bankruptcy code is complex, so most people need a lawyer – meaning they’ll incur filing fees and legal fees.
Poor spending and saving habits have become the norm where so many live beyond their means. They have no buffer or margin for the day when emergencies arise.
A 2017 GoBankingRates survey revealed that 57 percent of respondents said they have less than $1,000 in a savings account and that 39 percent of Americans have no money saved at all – zero – that’s a 5% increase since 2016.
Bankruptcy can often be avoided by immediately choosing to live on a budget, using cash, downsizing, driving less-expensive cars, buying only what you need, selling what you don’t need, and maximizing your income.
Remember, “Owe nothing to anyone except to love one another.”
And if you need help getting out of overwhelming credit card debt, contact our friends at Christian Credit Counselors today. Visit crown.org/ccc or call 800-722-1976