Debt Advice: Disadvantages to Filing for Bankruptcy

Many people are looking for debt advice especially when it comes to bankruptcy. For some people there is no alternative but bankruptcy, however, there are some disadvantages to filing for bankruptcy. It is important to remember that filing for bankruptcy will show up on your credit record for up to ten years, this will most likely affect your future financial dealings.

However, there is one way bankruptcy can improve your credit records. Since Chapter 7 allows a discharge of debts no more than once every eight years, lenders know that a credit applicant who's just came out of Chapter 7 would not be going into debt any time soon.

Although, studies have shown mixed outcomes. A research study by the Credit Research Center at Purdue University determined that about 30% of consumers who filed for bankruptcy had incurred a line of credit within three years of filing and about 50% had incurred a line of credit within five years.

Still, the new credit itself could still reflect the record of bankruptcy. For instance, maybe you qualified for a credit card with a 14 percent rate prior to bankruptcy and now the best rate you can get on a credit card is a rate of 20 percent.

Here is a little bit of debt advice - you may just want to consider the options prior to resorting to filing for bankruptcy. You could contact your creditors they may just be inclined to settle their claim for a lesser immediate payment, or they could be willing to extend the loan and bring down the size of the payments. This would provide you more time to pay back the debt by paying smaller payments over a longer time period.

Once in a while, you could bargain by consolidating your debts - you would then go take out a big loan to pay down the smaller debt. However, the common risk of this plan is that it is really easy to go out and use your credit cards to take on more debt.

So you just end up in more debt with no additional revenue to cope with the monthly payments. In fact, if you have acquired a second mortgage on your home to obtain the consolidation loan, you could lose your home also.

Some last bit of debt advice - once you reach that place and there truly is no where else to turn, you may just want to make an appointment with a credit counselor and ask them some questions about Chapter 7 personal bankruptcy.