Guest Post: Warning - Credit Cards Can Lead To Bankruptcy

Due to the overall poor economy, many businesses have been forced to lay workers off or reduce their salaries. Because of the reduced income, many people have had to rely on credit card debt to meet their monthly obligations. Unfortunately, this has caused many people to accumulate a vast amount of credit card debt, which could be impossible for many people to pay. To get out of credit card debt, many people are considering filing for bankruptcy. Prior to filing for bankruptcy to get out of credit card debt, all people should consider the advantages and disadvantages of filing.

The primary advantage of filing for bankruptcy is that it will remove many debts that a person has accumulated. Filing for bankruptcy is designed to remove a person’s liability on unsecured debt, such as personal loans or credit card debt. This is especially advantageous because this form of debt tends to have much higher interest rates than other forms of debt. Having this type of debt expunged could allow a person to regain financial strength and freedom.

The second advantage of filing for bankruptcy is that it will protect several types of assets. When filing for bankruptcy, most people’s liquid assets, such as checking and savings accounts, will be liquidated in order to pay back creditors. However, certain assets are completely protected and will remain in the possession of the debtor. When declaring bankruptcy, you will be able to keep any retirement savings that you have and you will be able to keep your home, unless you fall behind on mortgage payments as well.

While there are clear advantages to declaring bankruptcy, there are several disadvantages as well that must be considered. Beyond having your liquid assets taken by creditors, the main disadvantage of filing for bankruptcy is the negative effect it will have on your credit score. When you file for bankruptcy, you will receive a very negative mark on your credit report, which will remain on the report for up to 10 years. This will have a disastrous effect on your credit score and will likely prevent you from obtaining any form of credit or loan from a bank.

The second disadvantage of declaring bankruptcy is that it is an expensive and grueling process. When you file for bankruptcy, you most likely will need to hire an attorney, who will cost thousands of dollars and require an upfront payment made in cash. Furthermore, the process of bankruptcy can take months and will require a large investment in time to meet with your attorney and some of the creditors as they review your situation.

Guest post by: One Income Dollar