The Bankruptcy Fix

The Tool of Last Resort

Bankruptcy protection is a legal way of telling all (or mostly all) of your creditors, that you simply do not have the money to repay your debt and that you have no reasonable expectation of being able to repay it anytime in the near future. This process is one of the credit repair fixes of last resort and is accomplished with a judge in good standing in your state and requires the assistance of an attorney, and debt counseling for you.

The Bankruptcy Process

Bankruptcy begins with consultation with a licensed, experienced attorney, preferably one who specializes in bankruptcy law. He or she will guide you through the rest of the process, which cannot seriously get underway until you have attended debt counseling with a qualified service such as that offered by many businesses in the network of providers here at BadCreditRepairFix.com. These counseling sessions do not usually take a great deal of time, and are intended to instruct individuals as to how to manage their bankruptcy and avoid getting into the same types of financial issues in the future.

Once you have completed the counseling, the attorney will assist you in getting through the preliminary paperwork required in order to file your case. This includes compiling a very detailed list of all of your debts, including how much you owe, to whom it is owed, and their contact information. This is necessary because all creditors that will be discharged in your bankruptcy must receive notice of your intent to file, and will legally have the chance to contest your filing before the judge (though few businesses ever do). This notice that they receive generally has the effect of halting collections efforts and may, in some cases get the creditor to start trying to negotiate their debt with you. The threat of bankruptcy is scary to many of them since it may mean zero repayment of your debt to them. Lenders become much more open and willing to discuss alternative credit repair fixes to help you. Renegotiation efforts may include:

• Lump sum payment: Rather than receiving nothing, as they will if you get your bankruptcy discharge, many lenders will attempt a 'last-ditch' negotiation effort with you to pay at least some of the debt. Lenders may be willing to reduce the total amount owed in order to settle the debt by as much as 75%.
• Adjustment of payment terms: The lender will offer to adjust the terms of the loan (such as reducing interest), in order to entice you to reaffirm the debt.
• Debt reaffirmation: Debt reaffirmation is used for secured debts such as for your car or house. You may receive paperwork that essentially asks you to reaffirm the debt (meaning that it will survive the bankruptcy) under current (or adjusted) terms. Since you are usually allowed to keep at least one vehicle and your primary residence even after filing bankruptcy, debt reaffirmation is not viewed as necessary by many attorneys. Note, however, that even though you can stay in your house and keep your car, you must continue to pay on the debt as agreed and if you don't, the lender has the right to reposes the property as before. You will no longer receive any bills from the lender after your bankruptcy is discharged, so you must keep track of and stay on top of your monthly payments without any reminder.

Once the bankruptcy is set to be filed, you will be given a court date which is usually little more than an informal proceeding where you will appear and testify that you intend to file bankruptcy and that you cannot pay the debts you are seeking relief from. Your case will then be reviewed further for awhile before your actual debt is discharged and your bankruptcy finalized.

Bankruptcy Caveats

Bankruptcy cannot discharge all debts - some are almost always exempted such as debt owed to the IRS-no escaping them until you reach that other immutable fact of life, and student loan debt can only be discharged in the rarest of cases. Very large debts, that seem maliciously gained (such as quickly charging $15,000 on a credit card then filing bankruptcy immediately), may likely be challenged successfully by the lender and survive a bankruptcy as well.

Once you file for bankruptcy your credit report will reflect it for up to seven years as a significantly negative mark against your credit score. This is not something that the dedicated consumer cannot quickly overcome, however and certain techniques and wise uses of credit have been known to restore a consumer's credit scores to normal and respectable levels within just a couple of years. The key is in showing future lenders that you made a mistake, are past it, and are now treating your current lenders well and paying debts on time. Credit repair fixes like bankruptcy may seem somewhat extreme and are therefore only recommended as a last resort.