Bankruptcy has spun out of control and has hit a record high. A new bankruptcy law has been passed called "Bankruptcy Abuse and Consumer Protection Act." Americans are concerned with their high debt and are having to deal with this new law.
Most people who are confronted with this tough decision vacillate between �fighting� to �fleeing.� Do you want to struggle to pay the debts? Or do you get relief from the constant pressure and start over.
Well, if you put it that way, it does not look all that bleak. Unfortunately, the situation is often not that simple. And changes to the law effective October 17, 2005 has made the decision even more important.
Whether or not you should file for bankruptcy is a personal decision on your part. The factors are far too numerous and the overall impact of bankruptcy on your future finance far too important to treat a decision such as this lightly.
Before you decide, here are the things that you need to know:
� What are your alternatives to bankruptcy?
� Which chapter of the Bankruptcy Code should you file under?
� What debts will be discharged in bankruptcy?
Are there other options?
Some people make the mistake of treating bankruptcy as the be-all and end-all of everything. They think that once you get to that point where your debts far outweigh your assets and the chances of paying them off is not likely to happen anytime soon, the situation is ripe to file for bankruptcy.
Bankruptcy is not the only way. It is not the only solution. What you believe is an unsolvable problem may turn out to be quite solvable, if you only take the time to weigh your options well.
Always keep in mind that filing for bankruptcy has the possibility to be devastating both economically and emotionally. While there is less public stigma attached to the act for filing for bankruptcy these days, it could still do things to your confidence in making important financial decisions.
One of the positive aspects of filing for bankruptcy is that most bankruptcy cases are granted. So it is instant relief from debts versus toiling for years to pay off your debts. However, contrary to popular belief, bankruptcy is not an easy way out of a sticky situation.
Whether you are filing under Chapter 7 or Chapter 13, the end result is almost always the same � extensive damage to your credit and long-term economic issues. Now, you know, of course, what this means. These credit issues brought on by bankruptcy would cause many problems in the years to come.
So what, then, are your options besides bankruptcy?
That, my friend, is the question.
Renegotiate Secured Loans May Be Your Answer
First of all, what is a secured loan? How is it different from all other loan types out there? Is it any different from a credit card debt?
The answer to the third question is: It is very different. In fact, a secured loan could not be any farther from a credit card debt.
Simply put, a secured loan is one where you are made to mortgage your property so that the lender can forcibly sell it to get its money back if you can�t repay.
Now, if you think that once you file for bankruptcy, you can escape all your debts and start with a clean slate (so to speak), well think again. Because not all debts can be discharged with bankruptcy. And one such debt is a secured loan.
Now, the thing with secured loans is that they usually involve large sums of money � generally the largest most people have. Your car and/or your house are secured loans. So even if you file for bankruptcy, these debts will neither lessen nor disappear.
A better option would be to try to renegotiate these loans with the creditors. That is, if your debt has not completely caught up with you and ruined your credit already. Or you could take the loan elsewhere.
Let�s say, for instance, that you have a home loan that is several years old. You can try to renegotiate for a lower interest rate on this. And depending on your principal balance and current terms, there is every chance that you can see your payment go down by several hundred dollars per month. That is money in your pocket which you can use to pay off other debts.
If your home loan has only a few more years left, you can also try to lengthen the period or ask for an extension so you can reduce your payments even more.
Advantages
� The moment you file for bankruptcy, all collection actions by your creditors, including foreclosures, repossessions, and garnishments, are automatically stopped.
� Your bankruptcy lawyer, if you decided to hire one to handle your case, will shield you from any inquiries made by your creditors.
� Most states allow your home, car, and other essentials to be exempt. Consequently, bankruptcy means that you will not wind up homeless and unable to get around.
� Declaring bankruptcy means that you can get started on rebuilding your credit and your life sooner. Moreover, if something unfortunate happens, you are allowed to amend your existing Chapter 13 plan to accommodate it.
� While student loan debt will remain, filing for bankruptcy will protect you from lenders taking aggressive collection action.
Disadvantages
� You will lose all your credit cards. However, if you have paid off your credit cards before filing, there is a good chance you may still keep some of them.
� You may have to give up some of your luxury possessions.
� You will have some impossibly tough time getting a mortgage after recently filing a bankruptcy. It will get easier, however, after about five years from filing.
� A bankruptcy is a spot on your credit report and tends to remain there for ten years. This, of course, makes it difficult for you to acquire credit, buy a home or car, get life insurance, or sometimes get a job.
� Not all debts may be �discharged� in a bankruptcy.
Dean Shainin offers online Bankruptcy and debt advice. For more information, articles, current news, tools and valuable resources on bankruptcy and debt solutions, visit this site: How To File Bankruptcy
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