SOUTHERN FEDERAL CREDIT UNION

Office: 713-232-7774     Fax: 713-232-7122

         
   
 
 

Bankruptcy

Bankruptcy - A Ten-Year Mistake!
Bankruptcy is a law designed to relieve people of crushing debt, which is beyond their control due to catastrophic illness and/or job layoff. Bankruptcy is a federally mandated law, which takes two approaches to debt liquidation. One is a chapter 7, which is a "straight liquidation" of 100% of most debts at the time of discharge. The other is a chapter 13, which provides for a repayment plan, which may pay for all, or a portion of the debt incurred.

Because it is easy to obtain credit and use it indiscriminately, it is very easy to loose track of your spending. Unfortunately, the reasons most people have been forced to file for protection have nothing to do with illness, unemployment or hardship. Too often the causative factors are dissolution of marriage, inability to manage finances and spending mania. The great American public is a society built upon "consumerism." The average bankruptcy is still about $25,000.00. This let's you know that as a society, we no longer try harder. Bankruptcy is not a solution; it is part of the problem!

  1. Did you know that filing for bankruptcy is a public record and, as such, may be listed in the local newspaper in the legal notices?
  2. Did you know that the bankruptcy discharge would remain on your credit report for 10 years?
  3. Did you know that it could cost hundreds of dollars to go bankrupt?
  4. Did you know that discharged loans are losses for the companies that you have not paid and that it indirectly affects the overall economy of this nation which affects every man, woman, and child in this nation indirectly?
  5. Did you know that not all debts could be discharged under bankruptcy?
  6. Did you know that bankruptcy proceedings are public and very time consuming?
  7. Did you know that many companies would not hire bankrupt filers (such as banks, credit unions, and many other financial institutions)?
  8. Did you know that bankruptcy might keep you from obtaining an apartment or the purchase of a home?
  9. Did you know that for the past two years more than one million people have filed for protection under the various chapters of bankruptcy?
  10. Did you know that the law requires attorneys to certify that they have counseled clients about bankruptcy effects and alternatives?

WHAT TO DO
Talk to your creditors… inaction is much worse than the possibility of a bad experience on the telephone. Just in case you are not aware, there are laws, which protect consumers from abusive treatment. Believe me, your creditors would much prefer to work out a viable payment plan, than to receive a notice of bankruptcy filing.

Now that you are aware of some of the pitfalls involved with bankruptcy filing, is this the route you are willing to pursue? It took quite a while to get where you are and I can guarantee you it will take you a longer period of time to pull every aspect of your financial life together. There are no "quick fixes". The time spent rectifying this problem will be well worth the effort. I only ask you to get some thought provoking advice before you embark upon a "ten year mistake".
Finally, bankruptcy can be very demoralizing. Most people feel better when they pay their bills.

ALTERNATIVES TO BANKRUPTCY
There is just no easy way to get out of debt. A bankruptcy is not always the answer, as the effects are long lasting. Ask yourself these questions:

Can you reduce your monthly expenses, even if it means making hard choices?
Could you change your lifestyle to fit your income?

The following is a list of some ways to reduce your monthly expenses:

  • Selling the second car
  • Pulling equity out of your home
  • Applying for a non-secured signature loan to consolidate debts
  • Loan from a relative
  • Selling your home and paying off your debts with the proceeds and then renting
  • Cashing out your 401K retirement benefits
  • Selling family heirlooms, jewelry, guns etc.
  • Work out a reduced payment with some of your creditors.

It's important not to jump into bankruptcy until you understand what you will get out of it in the end. Some people file for bankruptcy when there is little need to do so. In many cases settling with creditors or getting help from a credit counseling service could better resolve your debt problems.