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Bankruptcy is one of the last options one has when a person’s finances are near or close to ruin.  There are many reasons why a person or business goes bankrupt, some go bankrupt because they are a victim of circumstance, others because they did not manage their money correctly.  When deciding whether to go bankrupt, you should consider the pros and cons.

The Pros
Bankruptcy can be extremely helpful to many people and give them a fresh start, as well as piece of mind.  Many families are haunted by debt and constant calls from collecting agencies.  For instance, many people go bankrupt due to reasons beyond their control such as a serious injury, illness or being laid off.  If you find yourself in a financial hole with tens of thousands in debt and no way to pay it off, bankruptcy should be considered as an option.  For instance, if you are seriously ill and owe 500K in hospital bills, unable to return to work and being hounded by creditors, bankruptcy can be a legitimate option to give you peace of mind and a fresh start.



It should be known that bankruptcy is only temporary.  In 10 years, the bankruptcy will no longer show up on your credit report and hopefully by that time, you will already have established credit and have managed your finances correctly.  While you might have to wait for a few years to buy a home or to get a loan for a new car, the effects of bankruptcy don’t last forever.

The Cons
Bankruptcy should not be taken lightly.  We all would like to get rid of our debts with one swipe of the pen, however bankruptcy has many consequences.  For one, you will probably not be able to receive a mortgage, car loan or personal loan for a few years.  If you are able to acquire a loan, you will surely pay extremely high interest rates.  In addition, you might not be accepted for a job or an apartment due to your bankruptcy on your credit report.

You should not consider bankruptcy if your debt is small and you are able to pay it off.    For instance, if you owe $20K in credit card bills, instead of going bankrupt, you should consider tightening your belt and spending the next few years paying off your debt.

Bankruptcy Pros & Cons

For most people bankruptcy is the final option.  No one looks forward to bankruptcy, but for those that go bankrupt they are given a fresh start.  Just because bankruptcy might seem like the last option doesn’t mean that there isn’t life afterwards.  In fact, once you go bankrupt, your objective should be to once again establish good credit and to manage your finances responsibly so you never find yourself in this situation again.  Here are some tips on how to conduct yourself financially after bankruptcy.

Credit Cards
Believe it or not, once you go bankrupt, you might see plenty of offers from creditors offering you new credit cards.  Although many credit card companies will not accept you due to a bankruptcy on your credit report, there are many banks and financial institutions that will specifically court your business because they feel that since you already have gone bankrupt you will make sure that you are more responsible with your debt. 
Another reason that many creditors court those that have just gone bankrupt is that most creditors assume that it will usually be years if ever that you go bankrupt again.

Build Credit Slowly
If you have gone bankrupt, there are a few strategies that you can help you build a good credit score.  One of the products available is a secured credit card.  These credit cards are extremely expensive to use and require you to pay an application fee, as well as deposit funds into an account.  For instance, for a $500 credit balance, you must deposit $500 into a special account which you borrow from.  While expensive, the good news is that with these types of cards you can start building a solid credit history once again.

Dealing with Obstacles
For those that go bankrupt you will surely find obstacles in your way.  Loans will be very difficult to attain and if you are able to attain loans, the interest rates will be very high.  Some employers may pass on you, because they may see you as unreliable or a security threat (if you want to work in retail).  However, this is the reality that you must live through.  Bankruptcy is a negative mark and does have financial and sometimes social implications. 

Bankruptcy and Credit Reports
A bankruptcy will show up on your credit report for up to 10 years.  While this might seem like a lifetime, for most this time will come and go giving the individual that went bankrupt a fresh start and some piece of mind from debt and creditors.

Filing for Bankruptcy