How Avoiding Bankruptcy Helps Your Financial Security

Some people believe that filing for bankruptcy is the best way to get out of debt. Most people who file for bankruptcy may think there is no other route to go down. However, bankruptcy is only one of many options a person has to reorganize their finances. Anyone who is concerned about their future financial security should avoid bankruptcy at all cost.

Bankruptcy Kills Your Credit Score

Going bankrupt will harm your credit score for a long time. It will be at least seven years before your credit report no longer shows your bankruptcy filing. Any lender who checks your credit will be able to see you filed for bankruptcy. Bankruptcy may also restrict access to any current lines of credit. Not having access to as much credit is going to make your credit risk much seem much higher. All of these factors will contribute to your credit score not being as good as it could be.

You May Still Owe Money

Your assets will most likely be liquidated to cover any unsecured debt being discharged. Secured debts are much harder to discharge. Certain property cannot be lost in a bankruptcy proceeding. Any lien on that property will still need to be paid off. You could be facing a situation where you still have to pay your auto loan each month. Most debtors are unlikely to have their debts completely discharged in bankruptcy court due to recent changes in the law. Creditors will usually fight for a reorganization of your debt as opposed to a true discharge.

Credit Consolidation May Be An Option

Declaring yourself bankrupt should be a last resort. Make plans to meet with a non profit debt consolidation service before you even think about declaring bankruptcy. A credit consolidation service can work with you on a plan to make your debt more manageable. This service will also work with your creditors on ways to reduce the amount that you owe. Consolidating your debt will lower your monthly payment by reducing fees and interest.

Creditors Don't Want To Go To Court

Your creditors may be willing to accept a debt settlement if you run into a financial emergency. They will be willing to take less if it means getting something from you. It will save both sides a lot of time to come to a settlement before the courts has to become involved. You can use a non profit debt consolidation service to help with settlement negotiations. Think carefully about offering a settlement before heading straight to bankruptcy court. Panicking too soon can cause you to make a decision you will regret.


Bankruptcy is something you want to avoid if at all possible. A good debt relief service can work with your creditors to come up with a payment plan that works for you. Offering a debt settlement is typically something that your creditors will agree to if they think you are serious about going bankrupt. You could be out of debt for half of what you owe. 

Author’s bio

Sheryl Fabia is a financial writer for NonProfitDebtConsolidationService.com. She writes articles on nonprofit debt consolidation, credit card debt relief and various financial matters and has them published across the web.