A big mistake is often made when people do not get enough advice from credible sources and make bad decisions based on the advice of their enthusiastic bankruptcy attorney, who solicits the benefits of bankruptcy. In turn, the attorney cashes in as their clients file for bankruptcy. As the attorney is convincing their client that filing is the best thing to do, he knows his client is also receiving harassing calls from debt collectors using scare tactics to get people to pay up. The long term effects of bankruptcy outweigh the pain of dealing with credit harassment and the current stressful financial situation.

The Last Resort

If you have completely exhausted every other method of debt resolution without success, filing for bankruptcy may be the only possible solution. But get plenty of advice first. The stress and depression of financial pain can just be too unbearable for some people.

Some people do not think of bankruptcy as "the last resort," instead they see it as a quick way out of some very serious problems. In our research, we have found that people who do file for bankruptcy fall into a cycle of financial problems. The only real way to break the pattern is through the help of professional credit advisors. Bankruptcy is a serious decision, and we recommend the choice should be reserved for health or extremely dismal circumstances*.

Effects of Bankruptcy

One of the most important effects of filing for bankruptcy is the psychological ramifications which are often sadly over looked. There are typically three types of stages one goes through after filing for bankruptcy. The first stage can last for the first few months, or even a couple years after someone has filed for bankruptcy. During this time the individual feels relieved, yet at the same time an immense feeling of guilt and failure. Once the individual moves out of this stage, there is a less stressful time where they forget about many of their past financial decisions. This time is short lived as the individual soon enters the third stage after filing for bankruptcy. During this time the individual experiences a lot of remorse and regret, often feeling a great deal of resentment towards those who advised them to file for bankruptcy. They realize that simple things such as not being able to buy Christmas or birthday presents become difficult to deal with year after year. Realizing that they are starting their lives over again, but without the ability to fulfill their life long goals becomes a painful reality. Those most harshly affected are those individuals who lose property that is non-exempt (unprotected). It can be tough. At Care First Financial we have helped many people on the brink of filing for bankruptcy*. It is possible to take control of your financial destiny and your life.

Chapter 7 Bankruptcy

When the word bankruptcy comes up, most people think of Chapter 7 Bankruptcy, also known as "straight bankruptcy." Many people think of this as a quick fix, although if they file for Chapter 7, they may later find themselves full of regret and resentment. An individual who files for bankruptcy can retain assets that are considered exempt assets but a court can require that person to liquidate the value of non-exempt personal belongings. An individual may have to repay a creditor with collateral such as, house, car, or land which were used when the individual secured the loan. (to find out more about Debt Consolidation Loans click here.) Limitations of what personal property is exempt varies from state to state, although Chapter 7 does provide sufficient protection for most assets.

Discharge is the term used when a court formally dismisses your case and removes your legal liability to repay creditors. Discharge usually takes between 3 to 5 months if everything runs smoothly. There are many times when a bankruptcy filing does not occur smoothly. A creditor reserves the right to file an adversary proceeding if they feel that a claim is non-dischargeable. Typically, a creditor will file a proceeding against claims involving criminal conduct, such as debts incurred on the basis of fraud or theft, embezzlement or breach of trust, or debts from willful or malicious injury to another person or their property. The creditor may also file a proceeding against damages from drunk driving responsibility. Credit card fraud can also include signing up for a credit card, loading up within a short period (12 to 24 months) and then filing. Do not expect creditors to just roll over; they often put up a good fight.

Not all debts can be discharged through Chapter 7. Some examples of non-dischargeable debts include the following:

• Debts resulting from fraud
• Alimony
• Debts resulting from drinking and driving or reckless driving
• Fines from traffic tickets or debts that result from criminal negligence
• Debts from willful or malicious injury to another person or their property
• Child support
• Credit card, personal loans, and installment purchases made within 40 days of filing
• Student loans (currently, student loans cannot be discharged unless the individual passes an undue hardship test. The individual has to prove that they made good faith efforts to repay the loan and prove that they cannot maintain a minimal standard of living if you were forced to repay the loan)