Bankruptcy lessons learned
Image Source: Flickr CC User Cristian Carrara
Many consumers approach bankruptcy with fear. But if you're deep in debt and can't pay your bills, it's the circumstances surrounding your debt that are frightening. Bankruptcy is a solution, not a problem, and it's nothing to be stressed about. Today we take a look at the misgivings clients share with us when they come in for a free North Carolina bankruptcy consultation – and how their attitudes change once they get the debt relief they so desperately need.
Here's what filing Chapter 7 or Chapter 13 can teach you about finances and debt.
#1 The Peace of Mind Is Life Changing
When clients come to our office to discuss bankruptcy options, they're usually at the end of their tether. Dealing with debt collectors is one major source of stress when you're cash-strapped, but there's also the day-to-day grind of wondering which bills to pay, how to stretch things until payday, and whether the stress will ever end.
Post-bankruptcy, you'll not only be free from debt collectors – with the financial pressure off, you can finally focus on the rest of your life. That peace of mind is priceless.
#2 Dealing with the Past Allows You to Focus on the Future
One of the scariest things about being in unmanageable debt is that it’s hard to see a future where things are better. Often, clients who come to us have little savings, no retirement account, and no safety net if they lose their job. They often feel hopeless about their personal and financial prospects.
Post-bankruptcy, with the mistakes and debts of the past eradicated (to the extent that bankruptcy allows), you can look ahead and make new plans. Without the past dragging you down, the future is brighter.
#3 Credit Cards Are a Dangerous But Necessary Part of Life
Most people who come into our offices to discuss bankruptcy have credit card debt. For some, using plastic became necessary because of a job loss or unforeseen increase in expenses. Others may not have understood the trap that credit card debt represents. We often hear clients swear to never use credit cards again once they’re out of debt, but that’s not the lesson to learn.
Post-bankruptcy, credit cards are an important tool for re-establishing your credit score, but only if used wisely. Only charging what you can pay off each month (and paying in full) is the best habit to develop.
#4 Debt Is Not Bad – But Too Much Debt Can Be Catastrophic
As with credit cards, many people who go through bankruptcy are gun-shy about accumulating debt. But debt is the primary way to obtain assets. Some financial gurus swear by a “zero debt” approach and say that you should pay cash for everything. But when it comes to purchasing a home or a vehicle, that seems improbable. Choosing debt that comes with the ability to build equity is usually preferable.
Post-bankruptcy, when you take on a debt agreement like a car loan or mortgage, shopping to get a good interest rate and doing all you can to maintain positive equity is a better approach than no debt at all.
#5 Your Credit Score Is Critical
One of the concerns of many clients who come in for a consultation is the impact that filing Chapter 7 or Chapter 13 will have on their credit score. But what they don’t understand is that missed debt payments, maxed out credit cards and more debt than they can pay have already done most of the damage, and filing bankruptcy allows a reset on declining FICO scores.
Post-bankruptcy, rebuilding your credit score is possible and should be a priority. Even if you don’t want to borrow, your credit score impacts what you pay for car insurance and homeowner’s insurance, and it can affect employability. Fortunately, there's plenty you can do to improve your credit after bankruptcy.
Come in for a Free Bankruptcy Consultation Today
If you’re deep in debt, living paycheck to paycheck, and being hassled by debt collectors, that’s no way to live. There is help out of your debt spiral. Contact the Law Offices of John T. Orcutt today for a free North Carolina bankruptcy consultation. Call +1-919-646-2654 now for a free appointment at one of our locations in Raleigh, Durham, Fayetteville, Wilson, Greensboro, Garner or Wilmington.