With unemployment spreading across the country, household foreclosures at all time highs, and credit card usage peaking previous history, bankruptcy appears to be a ray of sunshine for the individuals and families experiencing the pressures of our great nation's economy. Before considering this as your "golden ticket", allow me to shed some light on the consequences of filing bankruptcy.
Unfortunately, when considering bankruptcy, a common disbelief made by people is that it will be a fresh start for the individual. Actually, the process itself has become more time consuming, and the negatives outweigh the benefits. The first negative is common knowledge; the ten year blemish permanently staining the consumers credit bureau. What is less known is that that same record remains recorded throughout the courts public records for 20 years, causing difficulty in not only financing but also being hired by prospective employers. Additionally, this attracts high interest credit card companies and lending institutions to target these persons and further cause future difficulty, as if these kind folk haven't been through enough.
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Currently, with more and more new bankruptcy laws going into effect, just to file bankruptcy the client is enrolled into a "ticket-in" program. This is in essence a credit counseling session mandated by the courts through an agency approved by the U.S. Trustees Office. After finishing this program a completion certificate must be submitted. By the way, who do you think pays for this course? (Hint: not the government) Next, a "means" test must be done in order to qualify the candidate for filing, so if this person intended to file a Chapter 7 it is likely they will be rolled into a Chapter 13. Finally, a "Ticket Out" program must be completed, which is similar to a financial management course. These are merely the new hoops to go through for filing. I won't even touch on the incredibly outrageous lawyers fees that must be paid, and again, not by the government.
Another aspect to consider are one's assets. The courts can actually come to the filer's house and repossess property it deems unnecessary to auction off as partial repayment to the creditors, if forced to file a Chapter 13. So the HBO package goes, as well as many other "luxuries". Furthermore, failure to make payments on time, uncompleted ticket in/out programs or bad representation can cause the bankruptcy to be dismissed. When this happens the bankruptcy remains on the person's credit report and has reaped absolutely no benefit from the process.
My recommendation for anyone considering this avenue is to really seek out the most viable option for your personal situation. Consider selling unwanted or unneeded assets, working more hours or a second job, conduct a budget analysis, factoring in all incoming and outgoing payments and communicate with your creditors.
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