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Most people who have a huge amount of debt that they are struggling to finish paying off, at one time or another have thought about the option of filing for bankruptcy. In this article I am going to give you a couple very solid reasons why you should evade a bankruptcy proceeding at all costs, if you can. A lot of people don't understand the deep negative impact a bankruptcy can have.

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

Bankruptcy is one of the worst derogatory remarks that you could have put on your credit report. Thus making any additional credit you try to get very difficult, and if you do get credit it usually comes with a very high interest rate. Additionally, it will reside on your credit report for between 7-10 years. Even when it gets removed from your credit report it stays a public record for the remainder of your existence. So whenever you try for new credit at any point in the future, if they ask whether you have ever filed bankruptcy legally you must answer yes.

2. Brand New Bankruptcy changeover in 2005!

In 2005, our government passed a piece of legislation which makes anyone filing for a Chapter 7, which will wipe the table clean of all your debts much more difficult. Basically if you have an income producing job and a home than most assuredly you will go into a review to determine if you should go through credit counseling first for at least 6 months. According to NFCC close to 80% of people who try can not abide by the strict guidelines set from the creditors to complete the program thus tossing them back into the bankruptcy court. That's when Chapter 13 comes into light which is a method of personal bankruptcy in which the judge will decide how much you will pay back each collector you list based on your financial situation.

3. Court Controlled Income with Chapter 13!

Prior to the new law being approved in 2005 many people that would have been able to claim Chapter 7, were now made to go Chapter 13 instead. Chapter 13 requires that you review with the judge and show to them all of your finances. You must show all forms of income and assets. The court will go over your monthly expenses compared to your income and then determine how much money you will have to pay each month. You do not have much of any say in this process. If you have liquid assets such as a house they can force you to sell them, within State law, to pay down your debt. There are timed financial hearings each year and if your financial situation changes you must report this to the judge, this could increase the amount you pay back. If you have multiple family vehicles you could have to sell one to pay down the debt. They basically tell you what you can do with your income. If you have the premium cable you will be forced to cut back to standard cable, if you consume steaks every day you will need to cut back to cheeseburgers. This can be a very hurtful and embarrassing proceeding.

These are all very bad things that someone should be made conscious of prior to meeting with a bankruptcy attorney. A lot of attorneys will not disclose these poor facts of claiming bankruptcy. Bankruptcy is there for a purpose and for some people they have no other option available to them and must file for a bankruptcy proceeding, however a lot people go into bankruptcy unnecessarily. A very attractive alternative option to bankruptcy is credit card debt settlement. With debt settlement in the majority of cases you will save tremendously more money than you would have through a Chapter 13, besides you will get out of debt faster as well, and not experience the many negative consequences of a bankruptcy hearing.