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The DebtClear Roadmap

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Bankruptcy Pros & Cons

How to Avoid Bankruptcy

Bankruptcy can be a great form of debt relief. However, many people seek to avoid bankruptcy because of its negative impact on their credit and the difficulty qualifying for Chapter 7. For those looking to avoid bankruptcy, debt settlement or debt restructuring can be great bankruptcy alternatives.

In debt settlement, a professional debt settlement negotiator will negotiate settlement agreements with your creditors. Not only can this save you a significant amount of money, but you can usually have your credit repaired as part of the settlement agreement. Debt restructuring takes debt settlement one step further by allowing you to purchase your qualifying accounts back at 40 cents on the dollar over 2 — 4 years.

Another way to avoid bankruptcy is to follow the DebtClear Roadmap. Though collection activities will still continue until the statue of limitations expires on your debt, you will most likely experience greater debt relief than Chapter 13 bankruptcy debt relief. You can fill out the form above to receive a free digital copy of the DebtClear Roadmap ($14.95 in bookstores) and/or just read through the various sections of this website.

Whatever debt relief option you choose it is important to get bankruptcy information and your bankruptcy questions answered first by speaking with a bankruptcy attorney in your area.

Bankruptcy Information on Chapter 7 and Chapter 13

Before making any decisions about debt relief, consider the following bankruptcy information on the two types of personal bankruptcy.

Chapter 7 bankruptcy is a liquidation process that can take 4 to 6 months. To eliminate the debt, the bankruptcy court may decide to liquidate some of your assets as partial payment to your creditors. Unfortunately, not all debt is forgiven. It can also be difficult to qualify for Chapter 7, and it stays on your credit report for 10 years.

With Chapter 13 you are allowed to keep your assets, but you agree to pay some or all that you owe to creditors over 3 to 5 years (based on your debt and available income). Chapter 13 stays on your credit report for seven years. Both Chapter 7 and 13 bankruptcies require enrollment into a certified credit counseling program.

If you are filing a Chapter 7, you must wait eight years from the last Chapter 7 filing or six years from the last Chapter 13 filing. If you are filing a Chapter 13, you must wait four years from the last Chapter 7 filing or two years after a discharge of a previous Chapter 13 case.

Remember that there is quite a bit more bankruptcy information than just the simplified explanation here. There are a number of risks to consider before assuming that bankruptcy help is the best solution. Do your research, talk with a bankruptcy attorney and ask questions. Be sure to get the most bankruptcy information possible before making a decision on the bankruptcy debt relief solution that's right for you.

Bankruptcy Myths

Here is some bankruptcy information to alleviate common myths:

"Filing bankruptcy eliminates all of my debt."
Due to recent changes in bankruptcy laws, fewer people than ever qualify for Chapter 7. If you do qualify, you will be forced to liquidate certain assets. Chapter 13 will not eliminate all of your debt — you will have to repay some or all of your debt over 3-5 years.
"A solo bankruptcy will not affect your spouse."
In community-property states and when there are joint accounts, your spouse and his or her credit rating will be adversely affected.
"Bankruptcy can prevent repossession."
Bankruptcy can eliminate unsecured debts, but does not remove secured loans. If you secure a loan with property, bankruptcy eliminates the loan but may still allow the lender to repossess the property securing the loan.
"Bankruptcy will cancel child support and alimony payments."
Even if you file for Chapter 7, these debts are considered priority debts and must be paid.
"Bankruptcy will increase your credit score."
Many think that because some or all of their debt obligations are canceled their credit score will increase. The reality is, in fact, the exact opposite. A bankruptcy is the absolute worst thing you can have on your credit report.
"You can file as many tou can file as many times as you like."

If you have additional bankruptcy questions you can get a free consultation with a bankruptcy attorney in your area by filling out the form to your left.

Bankruptcy Debt Relief

Bankruptcy debt relief has proven to be more difficult and daunting for consumers due to the 2005 overhaul of bankruptcy laws. The primary objective of these laws was to make it harder to seek bankruptcy debt relief through Chapter 7 and lengthen the minimum times between bankruptcy filings.

The bankruptcy court has established what is known as a "means test" for those seeking bankruptcy debt relief for consumer debt. This is a formula that calculates whether or not you qualify for a Chapter 7 based on your income and expenses. If the means test determines that you have sufficient income and assets, then you are only going to qualify for Chapter 13—and the accompanying payment plan over a period of 3-5 years.

If you are looking for bankruptcy debt relief, make sure you consult a bankruptcy attorney regarding your options. Make sure you also check out debt settlement, debt restructure and The DebtClear Roadmap as a viable bankruptcy alternatives.

Bankruptcy Alternatives

Because of the damage to your credit score, many people seek bankruptcy alternatives. Before you do, consider some of the reasons you should take a closer look at bankruptcy.

  • Collection activities stop. The bankruptcy court will issue an automatic stay halting collection activities and any pending lawsuits.
  • If you qualify for Chapter 7 you can get rid of most of your debts and get on with your life in a matter of months.
  • Chapter 13 allows you to keep your assets and eliminate some unsecured debt.

If you qualify for Chapter 7 bankruptcy and can afford the associated costs, bankruptcy debt relief is probably going to be your best debt relief option. If you find you only qualify for Chapter 13 bankruptcy, you may consider the bankruptcy alternatives found on our homepage before making a final decision.