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It goes through many peoples minds when stuck deep in debt, at one time or another have considered the option of going bankrupt. In this brief article I am going to give you a couple very solid reasons why you should steer clear from bankruptcy at all costs, if possible. The majority of people in debt do not understand the deep negative shock a bankruptcy can have.

1. Filing for bankruptcy has an severe negative impact on your FICO credit rating and becomes a permanent public record!

Bankruptcy is one of the nastiest derogatory remarks that can be lodged on a credit report. Thus making any more credit you try to get extremely hard, and if you do obtain credit it usually comes with a extremely elevated interest rate. Additionally, it will stay on your credit history for up to 7-10 years. Even when it gets removed from your credit history it remains a public record for the duration of your life. So whenever you try for new credit at any point in the future, if they ask whether you have ever gone through a bankruptcy proceeding by law you must answer yes.

2. New Bankruptcy changeover in 2005!

In 2005, our government passed a piece of legislation which forces anybody filing for a Chapter 7, which wipes the slate clear of all your debts much harder. Basically if you have an money and assets than most likely you will go through a review to find out if you should do credit counseling first for at least 6 months. According to NFCC close to 80% of people in debt who try can not abide by the strict rules set from the credit counseling companies to finish the program thus throwing them back into the bankruptcy filing. That's when Chapter 13 comes into play which is a method of personal bankruptcy in which the court system will decide how much you will pay back each collector you list based on your budget.

3. Court Controlled Income with Chapter 13!

Prior to the new law being put into place in 2005 many debtors that would be able to claim Chapter 7, were now forced to go Chapter 13 in it's place. Chapter 13 requires that you go over with the judge and disclose all of your financial information. You must show all forms of income and assets. The court will look at your expenses compared to your income and then come to a determination on how much money you will have to deal out each month. The court decides this for you, leaving you with no say in this process. If you have liquid assets such as a house they can force you to sell them off, within State law, to pay off your debt. There are scheduled financial hearings each year and if your money making abilities change you must tell this to the judge, this could bump up the amount you pay back. If you have two family cars you could have to sell one to help pay off your debts. They for lack of better words tell you what you can do with your money. If you have the premium cable you will need to cut back to basic cable, if you eat steaks every night you will need to cut back to burgers. This can be a very painful and embarrassing process.

These are all seriously bad proceedings that people must be made aware of prior to meeting with a bankruptcy lawyer. The majority of attorneys will play off these bad facts of claiming bankruptcy. Bankruptcy is there for a reason and for some individuals they have no other option accessible to them and must file for a bankruptcy proceeding, however a lot individuals go into bankruptcy when it could have been avoided. A great substitute option to bankruptcy is debt settlement. With debt settlement in most cases you will save more money than you would have through a Chapter 13, besides you will get out of debt much quicker, and not go through the many negative consequences of a bankruptcy proceeding.