I was reading an article on Topp Finans and I got an idea. There are some dirty words in the English language, bankruptcy is one of them. It's really not dirty in the sense that it is vulgar, but it is associated with some very negative things. Bankruptcy can be expensive both emotionally and financially.
Bankruptcy is never your first choice for solving financial hardships. There isn't anyone who borrows money with the intention of going bankrupt, it just happens. Economic cycles cause businesses to fail, people lose their job, health emergencies arise, any number of things cause financial problems. Consider bankruptcy a tool provided by the capitalistic system for the "In Case" situations.
How to Avoid Bankruptcy
There is one major reason people head into bankruptcy, it is denial. Lets throw in procrastination too. Many times we can see the future when it comes to our finances. The job seems a little shaky, yet we go out and buy a new bed we don't really need. We see our income is starting to lag behind our bills, we hope it will get better, but it gets worse.
You see, many times the financial disaster doesn't just happen, it evolves right before our eyes. It's almost like we get paralyzed and do nothing.
If we take action at the start of these warnings, then we can avoid the emotional and financial hardships that come with bankruptcy.
Bankruptcy - Side Effects
Financial problems and emotions don't mix so well. You can use terms like stress, anxiety, arguments, embarrassment, depression, and whatever else you can think of. This is not a side of life a lot of people handle well. In some cases there is no other choice, bankruptcy is the only option.
- Credit Score - Your credit score goes into the dumpster during a bankruptcy. The bankruptcy stays on your report for 10 years. You can start to repair your credit the day after the discharge, it will take some work and time to get the numbers up.
- Cash Only - You will have to learn to live on "cash only" for a while. This is not a bad thing and will benefit you going forward.
- Insurance - For some reason car insurance factors in your credit score for premiums. If you see bankruptcy is inevitable make sure you have car insurance taken care of before you file.
- Fees - Each state is a bit different for the filing fees. Most people hire an attorney and they bill the filing fees in with the total fee.
Being an option, but not your first one, bankruptcy has its pros and cons. If you are not tracking your budget you should, this will give you a much better picture in case the warning signs appear.
Don't fear talking to your lender, they have a handful of options that can keep you out of bankruptcy.This post deals with: ... and focuses on: