People are increasingly choosing to file for a personal bankruptcy as a solution to their growing amount of credit card and other consumer debt that they are unable to repay. Depending on the type of bankruptcy, a person's debts can be completely discharged to provide a debtor with the opportunity to start over with their finances. Unfortunately, the irresponsible spending behavior typically lingers after the debts are discharged and the debtor falls back into the same financial predicament. Instead, debtors have several bankruptcy alternatives that they can take advantage of in order to avoid bankruptcy.
Bankruptcy is, in a nutshell, a person's inability to repay the debts that they have accumulated with any number of creditors. When a person decides to file bankruptcy, they are often admitting that they see no way out of the debt that they have built up. This can happen over a period of a few months or several years and for a variety of reasons, including school loans, medical bills, and credit cards, among others. Many people encounter circumstances that make it difficult to repay their debts while others might buy a lot of stuff on credit with the plan of declaring bankruptcy the entire time.
For years, many people decided to file bankruptcy in order to rid themselves of their student loans. Unfortunately for some people, the United States has recently made laws that exempt federal student loans from personal bankruptcy status. This means that even when a person has declared bankruptcy, they are still responsible for their federal student loans. Currently, this is the only exemption that debtors cannot add to their bankruptcy, but certain circumstances can allow for special provisions in very few cases.
For those who want to avoid bankruptcy, there are several ways to get out of what might seem to be insurmountable debt. Several bankruptcy alternatives are available and they are worth the extra amount of effort and work in order to preserve your credit. Since the United States passed new laws, it is almost impossible to have all of your debts simply relieved. Debts are more likely placed in a repayment plan with courts relegating a percentage of your income to each debt. The problem with this is that you can make deals with your creditors to make payments yourself without damaging your credit as much as a personal bankruptcy would do.
Getting your debts paid off takes a great deal of hard work and discipline. Personal bankruptcy should be reserved for those who are truly unable to repay their debts due to catastrophes or other circumstances. Only after you have exhausted all other bankruptcy alternatives should you decide to file for a personal bankruptcy because it will haunt you for the rest of your financial future with high interest rates and strict repayment schedules for major purchases. If it is at all possible, the best decision for you and your credit rating is to do whatever it takes to pay off your debts.
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