Most people who have a hefty amount of debt that they are struggling to pay off, at one time or another have contemplated the option of going through a bankruptcy proceeding. In this brief article I am going to give you some very serious reasons as to why you should keep away from bankruptcy at all costs, if possible. A lot of people in debt do not comprehend the deep negative blow a bankruptcy can have.

1. Bankruptcy has an tremendously negative effect on your credit and becomes a permanent public record!

Bankruptcy is one of the nastiest derogatory remarks that you could have put on your credit report. Thus making any additional credit you try to get very hard, and if you do obtain credit it usually comes with a very elevated interest rate. Additionally, it will stay on your credit report for between 7-10 years. Even when it gets removed from your credit report it stays a public record for the remainder of your existence. So when you apply for new credit at any point in the future, if they ask whether you have ever filed bankruptcy to avoid breaking the law you must answer yes.

2. Brand New Bankruptcy laws in 2005!

In 2005, Congress approved a piece of legislation which forces anybody filing for a Chapter 7 bankruptcy proceeding, which will wipe the slate clean of all your debts much more difficult. Basically if you have an money and assets than most assuredly you will go through a review to determine if you should do consumer credit counseling first for at the minimum 6 months. According to NFCC close to 80% of people in debt who apply can not follow the strict guidelines set from them to finish the program thus tossing them back into the bankruptcy filing. That's when Chapter 13 comes into light which is a form of personal bankruptcy in which the judge will decide how much you will pay back each collector you list based on your monetary situation.

3. Court Controlled Income with Chapter 13!

Before the new law was put into place in 2005 many people that would be able to claim Chapter 7, were now forced to go Chapter 13 in it's place. Chapter 13 requires that you review with the court and make available all of your financial information. You must show all forms of income and assets. The court will review your monthly expenses compared to your income and then determine how much money you will have to dish out each month. You have pretty much no say in this process. If you have liquid assets such as a house they can force you to sell them off, within State law, to pay off your debt. There are scheduled hearings each year and if your income increases you must tell this to the court, this could bump up the amount you pay back. If you have two family vehicles you might have to sell one to help pay off your debts. They basically tell you what you can do with your money. If you have the premium cable you will need to cut down to basic cable, if you consume steaks every day you will need to cut back to cheeseburgers. This can be a tremendously hurtful and embarrassing process.

These are all very negative proceedings that someone must be made conscious of before dealing with a bankruptcy lawyer. A lot of attorneys will not disclose these negative facts of claiming bankruptcy. Bankruptcy is available for a reason and for some debtors they have no other debt relief system accessible to them and must file bankruptcy, however the majority debtors go into bankruptcy when it could have been avoided. A very nice substitute option to bankruptcy is credit card debt settlement. With debt settlement in most cases you will save a lot more money than you would have with a Chapter 13, besides you will be out of debt much quicker, and not experience the many negative consequences of filing for bankruptcy.
Steve Bis is a debt analyst with the US Consumer Advocate, which practices debt relief.