Around one million Americans declare bankruptcy every year. In 2005, President George W. Bush signed the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA). BAPCPA makes it more difficult for consumers to file for Chapter 7 bankruptcy, although in most cases it is still possible. If you don't qualify for chapter 7, you probably qualify for chapter 13, which can be just as beneficial to you, if not more so, depending on your circumstances.
While filing bankruptcy does stop collection agencies from contacting you and provide relief from outstanding debts, there are several downfalls to filing bankruptcy that may make you think again. Chapter 7, 11 and 13 bankruptcies can remain on your credit for up to 10 years. This is very damaging to your credit score for at least the first two years after the bankruptcy has been discharged.
Creditors who may have not been included but were notified may decide to close your account. In most cases, you will find it extremely difficult to obtain any sort of credit after the discharge of your bankruptcy for a period of one to two years, sometimes longer.
If you are considering filing bankruptcy because creditors and/or collection agencies continue to call morning, noon and night-bankruptcy is not necessarily the answer. You have the power to make those harassing and often times embarrassing phone calls stop. The collection agency will require you to send in a cease and desist letter in writing. This letter should include your full name, address, debt collectors name and address, account number and date. Simply write that you request for them to cease and desist all communication with you and your family and friends regarding any and all debts that they say you owe. Continue to say that if they continue to contact you, you will file a complaint with the Federal Trade Commission.
If you are considering filing bankruptcy because you have fallen behind in payments and are finding it difficult to catch up, bankruptcy may not necessarily be the answer. Contact those creditors and tell them your situation. They will appreciate your honesty and will most likely be willing to come up with something more feasible for you for the time being. Let them know that you have every intention of paying your bills and keeping your credit record clean. There may be a special department that you need to speak to or you may want to talk with a supervisor as regular customer service agents don't usually have the authority to help in this manner.
If you still find that bankruptcy is the best option for you, make sure that you discuss all concerns with your lawyer and get answers to every question that you have. Read all the fine print. Make sure that you and your attorney agree on all the accounts that are being included in your bankruptcy. After the discharge of the bankruptcy, request a copy of your credit report to make sure that the credit bureaus have reported the information correctly.
Often times, accounts that have been discharged through bankruptcy do not reflect that information on the credit report and it looks as though the debt is still outstanding. But most importantly, take time to really think your decision through. Realize that it is something that is going to impact your life for a very long time.
Our office currently does a "credit clean-up" for you. If you hire our firm to handle your bankruptcy, after your discharge, we ask the credit bureaus to reinvestigate your credit, and make all the corrections. Then we follow up to make sure that they do so, at no additional charge to you. I'm told that this step alone will increase your credit score, from 25-150 points over what it would have been.