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Most people who have a huge amount of debt that they are failing to finish paying off, at one time or another have contemplated the option of filing for bankruptcy. In this brief article I am going to give you some very solid reasons as to why you should avoid a bankruptcy proceeding at all costs, if possible. The majority of debtors do not realize the devastating negative shock a bankruptcy can have.

1. A bankruptcy proceeding has an severe negative effect on your FICO credit score and becomes a lifetime public record!

A bankruptcy proceeding is one of the worst negative remarks that you could have put on your credit report. Thus making any more credit you try to get very hard, and if you do receive credit it usually comes with a pretty elevated interest rate. Additionally, it will stay on your credit report for between 7-10 years. Even once it is removed from your credit report it stays a public record for the duration of your existence. So when you try for new credit at any point in the future, when they ask whether you have ever filed bankruptcy legally you must answer yes.

2. New Bankruptcy changeover in 2005!

In 2005, Congress approved a law which makes anyone filing for a Chapter 7 bankruptcy proceeding, which wipes the table clean of all your debts much harder. Basically if you have an income and a home than most assuredly you will go through a review to determine if you should go through credit counseling first for at the minimum 6 months. According to NFCC close to 80% of debtors who try can not abide by the strict rules set from the credit counseling companies to finish the program thus throwing them back into the bankruptcy court. That's when Chapter 13 comes into the situation which is a method of personal bankruptcy in which the judge will determine how much you will pay back each creditor you list based on your budget.

3. Court Controlled Income with Chapter 13!

Prior to the new law being put into place in 2005 many people that would be able to claim Chapter 7, were now forced to go Chapter 13 instead. Chapter 13 requires that you review with the court and make available all of your finances. You must show all streams of income and assets. The court will go over your expenses compared to your income and then figure out how much money you will have to dish out each month. You do not have much of any say in this process. If you have liquid assets such as a house they can make you sell them off, within State law, to pay down your debt. There are scheduled financial hearings every year and if your income increases you must tell this to the court, this could increase the amount you pay back. If you have two family cars you might have to sell one to pay down the debt. They for lack of better words tell you what you can do with your income. If you have the higher costing cable you will be forced to cut down to basic cable, if you eat steaks every night you will need to cut back to cheeseburgers. This could be a tremendously painful and embarrassing proceeding.

These are all very bad things that people must be made conscious of prior to speaking with a bankruptcy attorney. The majority of lawyers will not disclose these unattractive aspects of bankruptcy. Bankruptcy is there for a reason and for some individuals they have no other option accessible to them and must file bankruptcy, however many individuals go into bankruptcy unnecessarily. A great substitute option to bankruptcy is debt settlement. With debt settlement in many cases you will save way more money than you would have through a Chapter 13, plus you will be out of debt much quicker, and not undergo the many negative consequences of a bankruptcy proceeding.