For the year of 2006, there were 621,349 bankruptcies filed in the United States. In 2008, Americans filed 1,115,813 bankruptcies. In the first quarter of 2009 alone, there have been 330,477 filings. Needless to say, bankruptcies are at an all time high. The average household currently owes more than $10,700 in credit card debt. American consumers as a whole owe more than $1.9773 trillion in debt (which doesn’t include mortgage loans). Many Americans are realizing that bankruptcy is the best option for themselves and their families. Click the link below to see how consumer debt is just portion of America’s increasing financial troubles. America’s Real Time Debt Clock
Bankruptcy is a legal method by which the Federal Government deems an individual’s debt as too burdensome and grants a waiver of much of the debts owed (a discharge). In many cases, most of the credit card debt that is owed is discharged entirely if you owe more than you can reasonably expect to repay. There are many situations where bankruptcy is the best solution. If you are overwhelmed by outstanding medical bills, garnishments, repossessions, liens, foreclosures and collection agencies bankruptcy may be the right solution for you.
The Automatic Stay
Immediately upon filing bankruptcy, the court will issue an order to all of your creditors which will put a halt to all further collection activities. This includes: foreclosure actions, repossession efforts, garnishments and collections activities just to name a few. This enables you to get back on your feet financially and to let the bankruptcy court begin to get a clear picture of your finances.
Why Should I File for Bankruptcy?
Credit cards are notorious for having excessive fees in addition to the 25% interest they charge. In many instances, it may take years before you can cut through the interest to actually pay back the principal debt.
Let’s take for example someone who has $10,000 in credit card debt, and who can only afford to make minimum payments…
Debt Amount: $10,000
Interest Rate: 18.90%
Minimum Payment: $200.00 (2% of Total)
Time needed to pay back entire loan: 50.08 years
Total Payments to Eliminate Debt: 601
Total Amount of Interest Payments: $34,193
Total Amount Paid: $44,193
Payments terms such as these can be unbelievably oppressive upon a family that is already in debt. Credit cards are just one part of the puzzle that is causing many Americans to struggle financially. Bankruptcy allows you to get out from under the various financial burdens that are preventing you from getting a fresh start on life. For many people, bankruptcy is not only the smart decision it is one of the most important decisions of your life.
Will Filing For Bankruptcy Ruin My Credit?
If you are severely behind on your payment to your creditors, chances are your credit score is already very low. A FICO score (Fair Isaac Corporation) is an estimation of your ability to repay your creditors. There are three major credit reporting agencies, with FICO being the most widely used. If you are not currently able to repay any of your debt, chances are your FICO score is already low. By filing for bankruptcy, your debts will be wiped clear and potential creditors will begin to look favorably upon your report within a few months usually. In many cases, filing for bankruptcy will improve your credit score because it gets you out from all of your burdensome bad debts.