Avoid Credit Card Bankruptcy - Why Bankruptcy Should Always Be The Last Resort

Feb. 15, 2011 - PRLog -- When stuck with enormous credit card debts, the very first idea that comes is that of bankruptcy. However, the consumers are advised to avoid credit card bankruptcy. As a matter of fact, they are asked to keep bankruptcy as the last resort. There are several reasons for such an advice. Let us have a look at the reasons.

When consumers file for bankruptcy, they lose their credit score completely. The credit bureaus display the bankruptcy filing report in the credit history of the consumers for a considerably long period of time. The report is showcased for 7 years to 10 years. It is during this period that the consumers fail to get any fresh loan from any creditor. Once this period is over, the consumers can get new credit but the lending organizations charges higher interest rates compared to what they actually charge to others.

During bankruptcy filing, there are a number of legal problems which the consumers need to face. For this, the consumers need to hire professional bankruptcy attorney. The fees for the attorneys can be as high as $200 to $400 an hour. This is when added up at the end of a successful filing, people find that the amount of money that they paid to the attorneys almost close to or more than the amount of money that they owed to the creditors. This makes bankruptcy filing the most expensive methods of relief among all available methods.

The consumers need to actually qualify for bankruptcy. This means that the consumers need to go for credit counseling and also, they need to go through means test. If the consumers fail to clear means test, they will not be allowed to file for bankruptcy and even after failing means test, if the consumers still insist for bankruptcy, they will have to repay the creditors in full as per the repayment schedule defined by the court.

It is because of these reasons that people are asked to avoid bankruptcy and use it as the last resort for debt elimination.

With the new FTC laws recently passed, debt settlement is a legitimate alternative to filing bankruptcy. Creditors are ready to negotiate and now you won't have to pay a fee unless your debts actually settle
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