Bankruptcy provides relief to people weighed down by massive debt, however it is not a free pass. During a bankruptcy, debtors may be required to liquidate their assets to repay creditors. Also, they can expect to lose access to existing commercial credit because credit card companies typically close accounts when notified that a bankruptcy is filed. And a debtor’s bankruptcy record will appear on credit reports for years to come.
That said, bankruptcy may be the most viable solution for people struggling to pay off significant debt. After bankruptcy is approved and debts are discharged, most individuals feel a great sense of relief.
Before a bankruptcy is approved, petitioners are required to participate in Financial Credit Counseling that covers advantages and disadvantages of bankruptcy, as well as alternative options. Credit Counseling also may provide insight to a debtor’s budget issues and planning. When a bankruptcy is filed, debtors must complete a pre-discharge budget analysis. With credit counseling and education, debtors may be able to avoid excessive debt in the future.
As with all legal matters, outcomes are not guaranteed. Each case must be assessed and approved on its own merit. It is important to learn about options available and develop a plan that will work for you.
As Dave Ramsey says, “When you create a basic budget and stick to it, it often seems like you have more money.” I believe when you stick to a budget, you also feel a greater sense of control, and you have a tool for avoiding debt in the future.