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Bankcruptcy
Bankruptcy can be a good solution for individuals who have tried other
methods of debt resolution and have experienced no relief. Sometimes, a
debtor has tried budgeting, refinancing is not an option, and credit
counseling has even proven ineffective because they can not afford to
pay their bills through the counseling company and still meet their
other obligations. After being forced into a "rob Peter to save Paul"
last ditch effort, the debtor realizes they need salvation. Often,
debtor's finances are stacked against them. Limited financial resources
cause a situation in which attempts to handle the debt is just
prolonging the agony and making it nearly impossible to effectively
satisfy all of their obligations. Bankruptcy may be the only effective
alternative to dealing with the tension and emotional distress that are
created by the financial hopelessness. When a consumer files bankruptcy,
they are protected from the emotional distress of collection attempts
because the creditors must obey an automatic stay that requires them to
cease any collection activity, including telephone calls, bills, and
even law suits that are pending against them. Each bankruptcy case is
assigned a court appointed trustee who acts as an intermediary and is
responsible for seeing that the creditors re-cooperate as much as
possible within the legal limits of the bankruptcy court.
The decision to file bankruptcy is one that should be thought out
thoroughly. Many consumers learn, only after filing, that it has lasting
negative effects that limit financial options and ability to obtain
credit. Many bankruptcy attorneys are overzealous in their approach to
soliciting the benefits of bankruptcy because they earn money by helping
consumers file. Likewise, in their pursuit of money, aggressive
collectors scare consumers, who are unaware of their legal rights, into
unnecessarily filing bankruptcy. Often, consumers realize that the
long-term sacrifices created by the lasting effects of filing bankruptcy
outweigh the pain that the collectors were causing. In many cases, if
the debtor had "called the collector's bluff" and simply ignored the
threats, they would have realized that they were unfounded.
Instead of viewing it as a last resort, many consumers view bankruptcy
as a "get out of debtors prison free card" that can be redeemed when
debt repayment gets too difficult. Bankruptcy can help consumers get out
of debtor's prison but it certainly comes with a price. Viewing
bankruptcy as an "easy way out" can cause extremely poor spending habits
by consumers who fail to face the reality of their financial
mismanagement and fall right back into the same situation. Bankruptcy
often carries long term derogatory affects on credit and successful
future financial management and understanding. Individuals who view
bankruptcy as an easy way out, often fail to learn from their mistakes
and continue to exhibit the adverse spending behaviors that created
their problem in the first place. Bankruptcy should be viewed as a right
and not a privilege. Many consumers who want to file, learn after
assuming massive amounts of debt, that it will not all be dismissed.
There are different types of bankruptcy, each having it's own guidelines
and limitations. Financial circumstances often prohibit consumers from
instantaneously eliminating all of their debt.
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