It passes through many debtors minds when struggling in debt, at one time or another have thought about the option of filing for bankruptcy. In this brief article I am going to give you some very serious reasons as to why you should keep away from a bankruptcy proceeding at all costs, if possible. Many debtors do not recognize the devastating negative impact a bankruptcy can have.

1. A bankruptcy hearing has an very negative impact on your credit and becomes a permanent public record!

A bankruptcy proceeding is one of the worst derogatory remarks that can be placed on a credit history. Thus making any additional credit you try to get extremely hard, and if you do get credit it usually comes accompanied with a seriously elevated interest rate. Additionally, it will remain on your credit history for up to 7-10 years. Even when it gets removed from your credit history it stays a public record for the rest of your existence. So whenever you apply for new loans at any point in the future, if asked the question whether you have ever gone through a bankruptcy proceeding by law you must answer yes.

2. Brand New Bankruptcy laws in 2005!

In 2005, Congress approved a law which forces anybody filing for a Chapter 7, which wipes the plate clear of all your debts much more difficult. Basically if you have an income producing job and assets than most likely you will go into a review to determine if you should go through credit counseling first for at the minimum 6 months. According to NFCC close to 80% of debtors who apply can not abide by the very regimented guidelines set from them to finish the program thus throwing them back into the bankruptcy proceeding. That's when Chapter 13 comes into the situation which is a form of personal bankruptcy in which the judge will decide how much you will pay back each collector you list based on your budget.

3. Court Regulated Income with Chapter 13!

Before the new law was passed in 2005 many people that would be able to file for Chapter 7, were now forced to go Chapter 13 in it's place. Chapter 13 requires that you go over with the judge and make available all of your finances. You must show all sources of income and assets. The court will go over your monthly expenses compared to your income and then figure out how much money you will have to dish out each month. The court decides this for you, leaving you with no say in this process. If you have liquid assets available they can make you sell them, within State law, to pay off your debt. There are scheduled reviews each year and if your income increases you must report this to the judge, this could bump up the amount you pay back. If you have two family vehicles you could have to sell one to pay down the debt. They basically tell you what you can do with your money. If you have the higher costing cable you will need to cut down to standard cable, if you consume steaks every night you will need to cut back to cheeseburgers. This could be a extremely hurtful and embarrassing process.

These are all seriously bad proceedings that people should be made aware of prior to meeting with a bankruptcy lawyer. Many attorneys will not disclose these poor aspects of claiming bankruptcy. Bankruptcy is available for a reason and for some debtors they have no other debt relief system available to them and must file bankruptcy, however the majority debtors go bankrupt when it could have been avoided. A great alternative option to bankruptcy is debt settlement.