Most bankruptcy attorneys paint a picture of bankruptcy as a magical wand that, once waved, makes all of your debt and financial problems disappear. In reality, bankruptcy is a huge red flag on your credit for the next 10 years and does not eliminate several kinds of debt including student loans. Bankruptcy should therefore only be pursued in the most extreme cases after all other options have been explored.

To help you avoid having to file for bankruptcy, we have compiled a list of the top 5 secrets to successfully dodging the bankruptcy bullet:

1. Do Your Homework: You should begin by understanding the ins and outs of today’s complicated bankruptcy regulations. You will most likely find that not all of your debt qualifies, and that other considerations, such as the possibility of losing property and assets, make the idea of bankruptcy completely unappealing.
2. Setup a Strict Budget: Learn how to setup a monthly budget showing total income and total monthly expenses, including rent/mortgage, utilities, food and clothing, and entertainment. This will help you establish how much money is available for paying your debts, and will make it easier to identify any expenses that you can live without
3. Raise Money Any Way You Can: Sell off your clutter at a yard sale, take a weekend job, or get rid of a few of your luxury items (motorcycles, boats, jewelry, etc.) to raise some extra cash to put towards your debt. Once you are out of trouble, you can always begin saving again to repurchase these items.
4. Live a Cheaper Lifestyle: Changes in your lifestyle can significantly reduce your monthly expenditures, freeing up cash for use in debt resolution. Instead of that weekly dinner out with friends, start hosting a weekly potluck dinner where everyone brings a different dish. Maybe upcoming vacations are a camping trip to the mountains rather than an island getaway. Changes such as these can save a sizeable amount of money over a year’s time.
5. Consult a Debt Settlement Professional: If you are still having trouble keeping up with growing debt, consult a debt settlement professional to come up with a strategy for settling your debt. By negotiating with your creditors, debt settlement professionals will be able to settle your accounts for a fraction of the amount owed.

Carefully evaluate all possible solutions and alternatives prior to moving forward with a bankruptcy filing. You may find that things aren’t as bleak as they seem, and you may be able to enjoy financial independence sooner than you think.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

A bankruptcy filing is a black mark on your credit history. This can make it difficult to obtain loans, mortgages, and credit cards. Both a Chapter 7 and a Chapter 13 bankruptcy will appear on your credit report for 10 years. During this time, you may be subject to several financial hardships:

1. Secured loans may be more expensive to acquire. Only a handful of lenders may approve you for mortgage and car loans. Acquiring a loan or mortgage may require an initial down payment of as much as 50%, and you may need to accept interest rates significantly higher than those offered to people with clean credit histories.
2. Unsecured loans may be impossible to acquire. Credit card companies typically reject applicants with bankruptcies on their credit histories. You may only be able to obtain a secured credit card, which requires a security deposit typically equal to the amount of credit initially granted. Fees for these cards are generally higher than for unsecured cards, and issuers may charge an application fee.
3. Not all retirement account assets are protected. Qualified retirement accounts, such as 401ks, are protected in all bankruptcy filings. And, up to $1 million in an individual retirement account is protected. Federal law requires that only those assets needed to support a filer and dependents are exempted, so you may only be able to keep a portion of an IRA account.
4. New legislation makes filing for bankruptcy more difficult. The Bankruptcy Reform Act of 2005 prohibits some people from filing for Chapter 7 bankruptcy; adds to the list of debts that people cannot get rid of in bankruptcy; makes it harder for people to come up with manageable repayment plans; and limits the protection from collection agencies for those who file for bankruptcy. In addition, anyone filing for Chapter 7 or Chapter 13 must undergo credit counseling at their expense six months prior to filing for bankruptcy and will also be required to take a financial-management course after filing.

Any individual contemplating bankruptcy due to unmanageable debt problems should seriously consider alternatives before moving forward with a Chapter 7 or Chapter 13 filing. With many qualified debt settlement  professionals available to help individuals settle their outstanding debt, many people find that there may be legitimate alternatives to bankruptcy with potentially fewer long-term repercussions.

This article is for informational and educational purposes only.  It is not intended to provide legal, tax or financial analysis.  Please consult your attorney, accountant or tax advisor if you have legal, financial planning, or tax related questions.

We are all familiar with the American tradition celebrating the 4th of July. On this day each year, we remember how our country’s founding fathers and a handful of colonial soldiers stood up against unfair taxation and ultimately defeated the most powerful standing army in the world.

If you are enrolled in a structured debt settlement program, you have another Independence Day to put on the calendar as well. This is your “Financial Independence Day”. This is the day your outstanding debt problems will cease to exist, leading to a greater sense of financial responsibility.

You’ve worked hard to put money aside each month in an F.D.I.C. insured special purpose savings account, and your debt settlement professional has been working hard to negotiate favorable savings on your accounts. The end of the road is in sight. So regardless of whether your program is scheduled to reach completion in 3 months, 6 months, or even a year from now, place it on your calendar today and get ready to celebrate.

Fire up the grill, stock the coolers, prepare the fireworks, and invite your friends and family. Tell them that you have stood up against unfair interest rates and late fees, and that you are celebrating your independence from today’s powerful army of creditors and collection agencies.

It seems like a gift sent from heaven, a panacea for all of your financial headaches when you find yourself overburdened with debt. Just file bankruptcy (Chapter 7) and voilà! All of your debts will be forgiven and erased; all those nasty debt collectors will have to stop those harassing phone calls that have been making your life miserable. What a relief.

But if you’ve been considering that course of action, you should be aware that bankruptcy is far from a panacea. Quite the contrary, the truth is that it’s accompanied by some substantial drawbacks.

— First of all, the filing will appear on your credit report for as much as ten years. That means every time you apply for credit, you’ll probably have to go through the same tedious routine of explaining the reasons that prompted the bankruptcy. And even then, your potential creditor may not be convinced. Obtaining credit in these harsh economic times can be a major challenge even for someone with a spotless credit record.

— Once you’ve filed for bankruptcy, you’re going to lose all of your property except what the law exempts. That isn’t going to make for happy days.

2005 Act Changed Everything

Despite these rather harsh penalties, many debtors used to find that, on balance, bankruptcy really did seem like a pretty good deal—until quite recently. Then, in October 2005, Congress enacted the Bankruptcy Abuse Prevention and Consumer Protection Act, and suddenly the party was over.

The act requires that a debtor enter into consultations with an approved consumer credit counseling service—the idea being that people must pay their debts if at all possible, rather than resort to bankruptcy as a first course of action. If a debtor is still determined to file, he or she must first get certification from that credit counseling agency.

“But wait, there’s more!” as those late-night TV commercials like to tell us at ear-splitting volume. Provisions of the 2005 act also include the following:

— More documentation from the debtor is required before a filing will be accepted.

— Subsequent filings are actively discouraged.

— The waiting period between Chapter 7 bankruptcy filings has been extended from six to eight years.

— Final discharge of the obligation is withheld until the debtor completes a course in personal financial management.

Magic bullets just don’t exist. When you add up all the negatives, you can readily see that filing for bankruptcy is a long, arduous process littered with roadblocks at every turn. That’s why entering into a debt settlement program is a better choice for many, letting experienced debt negotiation specialists settle with their creditors for less than they owe. It’s certainly a viable alternative for peace of mind and a fresh start.

Here’s a great primer on the debt settlement industry and how Goldline Research chooses the best companies for its coveted “Top Ten” awards.

A bankruptcy filing is a black mark on your credit history. This can make it difficult to obtain loans, mortgages, and credit cards. Both a Chapter 7 and a Chapter 13 bankruptcy will appear on your credit report for 10 years. During this time, you may be subject to several financial hardships.

1. Secured loans may be more expensive to acquire. Only a handful of lenders may approve you for mortgage and car loans. Acquiring a loan or mortgage may require an initial down payment of as much as 50%, and you may need to accept interest rates significantly higher than those offered to people with clean credit histories.
2. Unsecured loans may be impossible to acquire. Credit card companies typically reject applicants with bankruptcies on their credit histories. You may only be able to obtain a secured credit card, which requires a security deposit typically equal to the amount of credit initially granted. Fees for these cards are generally higher than for unsecured cards, and issuers may charge an application fee.
3. Not all retirement account assets are protected. Qualified retirement accounts, such as 401(k)s, are protected in all bankruptcy filings. And, up to $1 million in an individual retirement account is protected. Federal law requires that only those assets needed to support a filer and dependents are exempted, so you may only be able to keep a portion of an IRA account.
4. New legislation makes filing for bankruptcy more difficult. The Bankruptcy Reform Act of 2005 prohibits some people from filing for Chapter 7 bankruptcy; adds to the list of debts that people cannot get rid of in bankruptcy; makes it harder for people to come up with manageable repayment plans; and limits the protection from collection agencies for those who file for bankruptcy. In addition, anyone filing for Chapter 7 or Chapter 13 must undergo credit counseling at their expense six months prior to filing for bankruptcy and will also be required to take a financial-management course after filing.