Breaking The Bankruptcy Myths - Why Is It The Last Option?

After the recession period crept in, the investors and money lenders felt the urge to redefine the purpose of filing for bankruptcy. Recession completely gave a new dynamics to the financial sector which forced us to reconsider and introspect some of the bankruptcy myths. One of the major areas where bankruptcy myth was predominant was that consumers thought that filing bankruptcy is perhaps the best option to settle unsecured debts. However, this is not true since there are a number of negative aspects attached with it which people realize in due course of time.

Though, it has been well constituted by financial experts that filing bankruptcy is generally considered to be the last option as other methods have been personified as better options. Some of the common myths that surround bankruptcy are that people think that they are saving in the whole process. But in reality, bankruptcy is the most expensive method for settling debts as you, in most of the cases end up paying huge amount to lawyers which may even surpass your debt amount. Also, the whole process of settling debts through filing bankruptcy is very lengthy and time consuming. You need a lot of patience to actually witness your debts getting cleared slowly and slowly. The chances are very high that in some cases you may even lose the case and pay the full amount to your money lender without gaining anything.

Other bankruptcy myth which treats bankruptcy as the last option is the drastic reduction in your credit score. You suffer from severe credit loss and financial crunch as a bad profile starts building up. This in turn affects your future financial prospects as you are denied from applying for a fresh loan with any other financial body due to scathing of your credibility which may persist for many years.

Apart from this, according to bankruptcy myths, filing bankruptcy has its own rules and regulations involved. You just can't merely file for a bankruptcy. You have to meet certain requirements which are a prerequisite for filing bankruptcy. The Federal law expects you to pass the means test for further advancement in this process. In case you don't meet up with the specified requirements, you will be denied from applying for bankruptcy filing. However, if you are adamant about filing then you will have to give the payment in one go without any monthly scheme to your money lender.

Due to such reasons filing bankruptcy is considered to be the last option. However, to avoid such situations, you can go in for debt settlement programs which are far better than bankruptcy in terms of clearing debts.