The Disadvantages Of Filing For Bankruptcy

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The Disadvantages Of Filing For Bankruptcy

Bankruptcy is, by definition, a legal declaration that a borrower lacks the ability to repay his or her creditors and an appeal to the courts for relief. Plainly this is not a good position to be in and in some societies – like that of the United States – declaring bankruptcy carries a social stigma that suggests the bankrupt is irresponsible and untrustworthy. This alone is enough to convince many people to avoid bankruptcy until there really is no other alternative available, but this somewhat defeats the purpose as the benefits of declaring bankruptcy are only fully realized if the claimant makes the filing before they are completely destitute.

Obviously bankruptcy looks bad to most creditors as it shows that the individual has a history of defaulting on his or her debts. However, interestingly enough, the law now stipulates that credit card debt cannot be discharged in bankruptcy a second time until eight years have passed, so this means that people that have recently have their bankruptcy cases resolved make prime targets for predatory lenders since it is guaranteed that the bankrupt cannot go back to court for eight years. Nevertheless, bankruptcy stays on the credit report for a full ten years and cannot be removed, even if the person manages to acquire new credit after the fact.

Many people also have a lot of misunderstandings about exactly what bankruptcy can do for them. The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 radically altered the bankruptcy laws of the United States and many of the things that were possible before this are no longer allowed. Further, it has to be kept in mind that bankruptcy does not discharge all debts, and since the aforementioned act passed it discharges even less than had previously been the case. By law people have to go through credit counseling before they can file for bankruptcy today, so it is worth taking the time to see if other options may be more appropriate. 


If you face the prospect of having to file for bankruptcy, it may make sense to speak to a bankruptcy attorney. Learn more about Bankruptcy Attorney Huntington Beach at http://www.consumerbankruptcyattorney.com.
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