Looking at the Bright Side of Bankruptcy

By: Jon Arnold

Is there a bright side to bankruptcy? Yes there is, although bankruptcy should still be considered your option of last resort, and the bankruptcy option only employed after you have thoroughly investigated all other options and alternatives. There are many downsides to filing bankruptcy, not the least of which is that this will become a huge red flag on your credit report for the next seven to ten years.

But sometimes bankruptcy is the best option in a given situation and if that is the case, you need to understand that there are bright sides to bankruptcy. Keep in mind that, especially with the new bankruptcy laws, one cannot file for bankruptcy on a whim, nor can it be done if you have already declared bankruptcy in recent years. The bankruptcy court needs to APPROVE your bankruptcy before things can move forward, and that approval is not nearly as automatic as it once was. Yes, after looking in your particular financial situation in a great amount of detail, the court may actually decide that you are not eligible to file bankruptcy, and you have to seek another option out of your financial difficulties.

One of the bright sides of bankruptcy, if you are approved to be able to file, is that the harassing phone calls from your creditors come to a screeching halt. But here is where it gets tricky because you also have some responsibilities here. After you have filed your bankruptcy petition and it is approved by the bankruptcy court, knowledge of this fact is not known to your creditors automatically. So the next time they call after your bankruptcy has been approved, keep track of the information. Write down the date and time of the call, which creditor it is, the name of the collections agency, and the name of the individual calling. Let them know that you have filed bankruptcy. By federal law, that stops calls from that creditor.

The reason for keeping a notebook handy where you record this information is so that if a creditor calls again who has already been told that you have filed bankruptcy, again write down the name, phone number, name of the person and name of the creditor as well as date and time of the call. With that information in hand, you can inform the creditor that they are now in violation of federal law. The ball is now in your court. There have been cases where a creditor continued to call after being informed that you had declared bankruptcy, and as a result, the consumer filed a countersuit against that creditor for their continued calls, and the debt from that creditor was wiped clean!

Another bright side to bankruptcy is your potential ability to start over with a clean slate and no financial obligations. Getting new credit is going to be difficult and you will have to spend time getting things like a personal loan, car loan, or even a mortgage, but it can be done. But since your credit report will show your bankruptcy filing clearly, be aware that it will be a longer row to hoe than it previously was.

If you file bankruptcy under the Chapter 7 regulations, you will need to demonstrate and prove that you are unable to pay even a portion of your outstanding debts. If this can be proven to the court's satisfaction, your slate will be wiped clean.

The decision to file bankruptcy is not an easy one to make, and again, you are encouraged to examine all your options and alternatives. But if bankruptcy is your most viable option, make sure you understand the bankruptcy laws and have a bankruptcy attorney who understands them, because you don't want to risk making a bad situation worse.

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