While a bankruptcy can help free an individual from debt, it will leave a stain on one’s credit. During the seven to 10 years the bankruptcy stays on a credit report, it may be difficult to get a loan or even rent a car. Therefore, it is important to know whether bankruptcy is the best option to overcome financial difficulties.
One way to reduce the odds of filing for bankruptcy is to create a budget. This tool will allow an individual to see what he or she is spending money on. Without a budget, it’s easy to overspend and take on overwhelming debt that cannot be repaid. Ideally, individuals will live below their means and strive to save at least 10 percent of every paycheck.
While credit cards can be a convenient and effective financial tool, they should only be used for purchases an individual can pay off in a timely manner. Otherwise, balances may quickly increase and lead to crippling debt. In the event that someone has already racked up a large credit card or any other debt, it may be possible to renegotiate repayment terms. Lenders know that it may be better to take a portion of what they are owed compared to possibly getting nothing in bankruptcy proceedings.
Those who wish to file for bankruptcy may want to consider talking to an attorney. A lawyer can explain the benefits of bankruptcy such as filing an automatic stay of collection efforts. This means that while the case is pending, creditors may not be able to pursue a foreclosure, repossession or other legal action against a debtor.