• 18
  • August
    2011

Many individuals going through financial difficulties don't know exactly what to do to get themselves out of their situation. One question that often comes up is whether it is better to go through credit counseling and get one's payments down to a manageable level or to file for bankruptcy.

Many consumers who have already gone through the credit counseling process and are able to make their payments still wonder whether it would be better for them to apply for bankruptcy. A Fox Business article recently looked at the question by surveying the pros and cons of filing for bankruptcy, particularly Chapter 7 bankruptcy.

In terms of the positives of filing for Chapter 7 bankruptcy, consider the following.

In a Chapter 7 bankruptcy, you can:

•· Eliminate all unsecured debt, including credit cards, personal loans and medical bills

•· Generally keep your home and vehicles

•· Rebuild your credit around sex to eight months after filing, when your case is closed

•· Qualify for home loans two to three after filing

•· Significantly reduce financial pressure

In terms of the negatives:

•· The Chapter 7 filing will remain on your credit report for 10 years

•· Many people endure some degree of feelings of guilt

•· You will be denied credit or receive higher interest rates until your credit score recovers

•· Your ability to obtain employment may be harmed if a potential employer orders a credit check

In our next post, we'll continue looking at the positives and negatives of filing for Chapter 7 bankruptcy vs. obtaining credit counseling.

Source: Fox Business, "Credit Counseling: Damaging as Bankruptcy?," Justin Harelik, August 16, 2011.