If you find that you are in a dire financial situation, and that you don't have enough money to pay off the creditors who keep calling your house, you may be in a position where bankruptcy is the right option for you. Here are three important things you need to keep in mind about bankruptcy.
#1 Your Student Loans Will Still Be There
If you have a large student loan debt, you need to realize that going through bankruptcy is not the solution to solving your student loan debt problems. Student loans are the one type of loans or debt that you can't get rid of if your loans were originally issued through the federal government. If they were private party loans that you took out, you may be able to get some relief.
If you have student loan debt, you need to work with the loan lenders. A bankruptcy attorney may be able to help you negotiate more favorable terms with the holders of your federal student loans; however, going through bankruptcy is not going to get rid of your student loan debt, so if that is your only motivation for going through bankruptcy, you need to look into other options.
#2 Bankruptcy May Not Be As Bad On Your Credit As You Think
Although it is true that bankruptcy proceedings will stay on your credit record for a decade, they may not have the negative impact that you are expecting on your credit score. If your credit score is already severely damaged by missed payments, chronic overdue accounts and charge-offs, your credit score may already be so low that filing for bankruptcy may not make it any worse.
In fact, after a few years, you may see that your credit score actually starts to improve as you lower your overall debt ratio and make payments on time. It takes a decade for your bankruptcy to fall off of your credit report; it doesn't take a decade for your credit score to improve.
#3 Joint Account Holders Don't Count
Finally, it is important to realize that if you have someone who is a joint account holder or co-signer on an account that you owe money on, that your bankruptcy is not going to absolve them of the debt. The courts could decide that your debt is forgiven and that you don't have to pay back that particular debtor. However, that creditor may still go after whomever co-signed or was on that account with you for the full amount of the debt, with the entire legal responsibility for that debt now lying in their hands. Make sure that you talk about these repercussions with anyone whom you owe money with together before going forward with bankruptcy proceedings.
To learn more about the process, contact a bankruptcy lawyer.
