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Most debtors who have a huge amount of debt that they are having problems looking to pay off, at one time or another have thought about the option of going through a bankruptcy proceeding. In this brief article I am going to give you some very solid reasons why you should evade a bankruptcy proceeding at all costs, if you can. The majority of people in debt don't recognize the very negative shock a bankruptcy can have.

1. A bankruptcy hearing has an tremendously negative effect on your FICO credit rating and becomes a permanent public record!

A bankruptcy proceeding is one of the nastiest negative remarks that you could have put on your credit report. Thus making any more credit you attempt to get extremely difficult, and if you do obtain credit it usually comes accompanied with a very high interest rate. Plus, it will remain on your credit report for between 7-10 years. Even when it gets removed from your credit report it remains a public record for the remainder of your existence. So when you apply for new credit at any point in the future, if they ask whether you have ever filed bankruptcy to avoid breaking the law you must answer yes.

2. Brand New Bankruptcy laws in 2005!

In 2005, our government approved a piece of legislation which makes anyone filing for a Chapter 7, which wipes the slate clear of all your debts much more difficult. Basically if you have an money and a home than most assuredly you will go into a review to find out if you should go through credit counseling first for at least 6 months. According to NFCC close to 80% of people in debt who apply can not follow the very regimented guidelines set from the credit counseling companies to finish the program thus tossing them back into the bankruptcy proceeding. That's when Chapter 13 comes into light 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 financial situation.

3. Court Regulated Income with Chapter 13!

Prior to the new law being passed in 2005 many debtors that would be able to file for Chapter 7, were now made to go Chapter 13 instead. Chapter 13 requires that you review with the court and disclose all of your financial information. You must show all sources of income and assets. The court will review your expenses compared to your income and then figure out how much money you will have to deal out each month. You do not have much of any say in this process. If you have liquid assets such as a paid off car they can make you sell them off, within State law, to pay off your debt. There are scheduled hearings each year and if your income increases you must tell this to the court, this could bump up the amount you pay back. If you have two family cars you might have to sell one to help pay off your debts. They for lack of better words tell you what you can do with your income. If you have the higher costing cable you will need to cut down to basic cable, if you consume steaks every night you will need to cut back to burgers. This could be a extremely hurtful and embarrassing proceeding.

These are all seriously unattractive things that someone should be made aware of prior to meeting with a bankruptcy lawyer. The majority of lawyers will not disclose these poor facts of bankruptcy. Bankruptcy is there for a purpose and for some people they have no other debt relief system accessible to them and must file for a bankruptcy proceeding, however a lot people go bankrupt when it could have been avoided. A great substitute option to bankruptcy is credit card debt settlement. With debt settlement in most cases you will save more money than you would have through a Chapter 13, besides you will be out of debt much quicker, and not undergo the many negative consequences of a bankruptcy proceeding.

Steve Bis is a credit card debt analyst with the US Consumer Advocate, which practices in credit card debt reduction.