Bankruptcy –Is it a permanent or temporary solution?
The "B" word – it may seem like a solution to your financial woes, but bankruptcy isn't a "get out of jail free" card. Yes, it will get you out of debt, temporarily, but will it solve all your problems? When the bills have been piling up for several months, perhaps years, and creditors are making countless calls, it may seem necessary to file for bankruptcy, but often it's best to try to avoid it if possible.
Filing for bankruptcy is not always the best option and the repercussions can be long–term. You'll end up paying higher rates on future loans, if you can even qualify. And, if you want to purchase a home, your application is likely to be denied.
If AMFCU experiences a loss due to your bankruptcy, we cannot provide you any future services. For the next several years, your credit score will be dramatically impacted and you may have to resort to high priced finance companies to get a loan.
So not only are you once again in debt, but also because it is at such a high rate, it will take longer to pay off and you will be paying a substantially higher total amount of money out of your pocket.
Although prevention is the best method, there are other options when it seems too late. You may consider paying some of your lenders so you can salvage some good credit standing. We often work with members in order to keep the relationship good so that we can continue to provide services to them.
You might also consider a debt management or consolidation plan, wherein you would take out a loan to pay all your creditors and have only one loan payment. This can help you to restore bad credit and/or maintain or rebuild a good credit rating, putting you on a manageable debt path.
Sometimes circumstances dictate having to file bankruptcy. Other times there are worthwhile alternatives. Either way you choose, it will be an important decision, one that should be taken very seriously. Just be sure that before making any decisions, you become fully educated of the repercussions of the choices you are making, helping you to avoid the pitfalls of bankruptcy.