The decision to file bankruptcy is a tough one both financially and socially so it is not to be taken lightly.

From a social perspective, most people are taught that a bankruptcy is an embarrassing sign of failure and filing for bankruptcy is something that should be avoided as long as possible. The bottom line is most people did not plan on filing bankruptcy. In fact, most people filing today had their life in order even one or two years ago. Whether it be the economy, a medical emergency, a death in the family, or some combination of factors, bankruptcy filings are very common right now.

From a financial perspective, a bankruptcy filing can stay on your credit for up to 10 years. A bankruptcy filing on your credit will affect your ability to get approved for an auto loan, home loan; and a bankruptcy can even affect whether or not you are given a job or an apartment to rent. Additionally, even if you are approved for a loan after bankruptcy, the bankruptcy itself can dramatically affect the interest rates you qualify for.

HOWEVER, all of the cons listed above can also be associated with bad credit in general. The big difference is that a bankruptcy gives you an end to the collection calls, credit card debt, late payments, and everything else that is discharged in your bankruptcy. Not only that, but there are a lot of loan programs available to most people with a recent bankruptcy that are not available to people trying to stay afloat with late payments, collections, and bad credit in general.

The decision to file for bankruptcy is actually very simple: Does your monthly income cover your monthly bills? If you cannot afford your debt, utilities, food, insurance, etc. then you might want to at least meet with a bankruptcy attorney to go over your financials.

If the attorney suggests you file bankruptcy, you need to decide to file a Chapter 13 Bankruptcy or a Chapter 7 Bankruptcy. In a Chapter 13, you enter a 36-60 month plan in which you pay a portion of your debt back. In a Chapter 7, everything you want to get rid of is wiped out (with exception of non-dischargable debts like student loans and child support). Many people unfamiliar with bankruptcies think that a Chapter 13 is better than a Chapter 7 because you are paying some of the money back. THEY ARE WRONG.

In a Chapter 13, you cannot take out a major debt without permission from the judge or trustee. Additionally, you still have to qualify for the loan. If you want a Chapter 13 Auto Loan anytime you are still in the 13, it is real pain. However, if you filed a 7, your bankruptcy is over about 90 days after you file and you have many loan options available to you as soon as after your 341 meeting of creditors.

Many people who file a 13 end up dismissing it due to non-payment. Then, they either refile another Chapter 13, or they file a 7 at that point. Guess what? Now you are considered a double bankruptcy. Your credit reports the number of times you file bankruptcy, not the number of times you go through with it. A double bankruptcy will limit the credit and loan options much more than just a single filing. Additionally, because of the refile risk, the lenders that will approve you for a Chapter 13 Auto Loan are not as numerous as the lenders that will do a Chapter 7 Auto Loan.

The decision to file bankruptcy is  not to be taken lightly. However, with many years of helping people both before and after bankruptcy, it is much easier to rebuild bad credit after a bankruptcy than before. That being said, none of us here in the WA Auto Credit office are attorneys, and our thoughts and opinions are not to be interpereted as legal advice. PHEW! The disclaimer is over.

If you are considering filing for bankruptcy, consider contacting a bankruptcy attorney right away. The sooner you start, the sooner you are done and can start reestablishing your credit.