Tuesday, June 19, 2012

The Truth About Bankruptcy


"Bankruptcy. That word sends chills up the spine. If you're facing the prospect of bankruptcy or in the middle of it right now, you know it's a living nightmare. It can devastate your job, destroy your marriage and steal your peace of mind." Quote from Dave Ramsey

I find in this day and age, bankruptcy is often thought of as an "easy way out."  But I have personally seen the stress of going through a bankruptcy destroy lives, marriages, and families.  Bankruptcy should be avoided if at all possible. However, I realize that in some instances bankruptcy may be the only option.

Bankruptcy also destroys your credit. Dave Ramsey states that "Chapter 7 Bankruptcy, which is total bankruptcy, stays on your credit report for 10 years. Chapter 13 Bankruptcy, more like a payment plan, stays on your credit report for seven years. Bankruptcy, however, is for life. "

Want to purchase a home?  Another negative impliction arises when someone who has gone through bankruptcy wants to purchase a home. To qualify for a home loan using an FHA loan, the bankruptcy has to have been discharged for 2 years on a Chapter 13 or 4 years on a Chapter 7 bankruptcy.  To purchase a home using conventional financing, the bankruptcy must be discharged for 4 years.  After a bankruptcy, the prospective borrower must have either established new credit or have no credit at all in order to qualify.  There can be NO derogatory credit issues when a credit report is pulled.  Bankruptcy is NOT an easy way out.

According to an article written by Dave Ramsey, "Bankruptcy is listed in the top five life-altering negative events that we can go through, along with divorce, severe illness, disability, and loss of a loved one. I would never say that bankruptcy is as bad as losing a loved one, but it is life-altering and leaves deep wounds both to the psyche and the credit report."

If you are considering a bankruptcy or have gone through a bankruptcy, click on the link below for the "rest of the story."

Myth: I'll just file bankruptcy and start over; it seems so easy.

Truth: Bankruptcy is a gut-wrenching, life-changing event that causes lifelong damage.

The Truth About Bankruptcy





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