What Every Borrower Should Know About Declaring Bankruptcy

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When debt piles up, sometimes bankruptcy seems like the only alternative. If you are able to make the minimum payments on all your debts each month, and be able to pay extra on at least one debt, you can eventually work your way out of debt. But when credit card balances, second mortgages and other debts accumulate to the point where you can no longer make the minimum payments, bankruptcy may be your only alternative. 
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Speak to an Attorney 
When considering ch 13 bankruptcy, only a qualified attorney is able to evaluate your position. Each person deals with a different situation. Some of the things your attorney may discuss with you are your current assets, the properties that you can keep and those that you have to give up, and other issues related to settling your debt. The attorney will help you determine if bankruptcy is the best option; if so, he or she will help you file prepare your case for filing.

Stop Spending Money You Don't Have
When you realize that you need to file for bankruptcy, stop using all lines of credit and don't take out more loans. The bankruptcy court will not look favorably upon individuals who used credit knowing that it would never be paid back. Most people have maxed out their credit before reaching the point of bankruptcy, so this is not usually an issue. Your attorney can best advise you on what is or isn't advisable to do during the bankruptcy process.

Decide What to Reaffirm On 
In many cases, people can keep certain items, such as their home or car, even after bankruptcy. This is called reaffirmation. Basically, you promise the loan company that you will keep making the payments if you are allowed to keep the property. If the loan company accepts your reaffirmation, the mortgage payments or car loan continue as if the bankruptcy never happened. It is usually in the loan company's best interest to accept your reaffirmation, because reselling repossessed properties is burdensome for them.

Begin Rebuilding 
Once your bankruptcy is final, you'll immediately want to begin reestablishing your good name. Make sure all payments on reaffirmed property are made promptly. Keep your bills up to date. Avoid credit cards, car loans and other credit following your bankruptcy because they come with huge interest rates and annual fees, especially with your financial background. While taking out a small loan and repaying it can help rebuild your credit, these offers are often a pathway for debtors to go right back into debt.

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