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Don't be afraid to file a Chapter 7 bankruptcy

A lot of people are terrified at the idea of filing for bankruptcy, for a number of reasons.

In reality, a Chapter 7 bankruptcy will have a negative effect on your credit for a while. There's no avoiding that. However, it's important to keep some perspective about the situation.

Here are some of the most important things you should know:

1. Your credit may already be on life support

Credit scores are complicated, but one of the largest things that factors into your score is the amount of debt you have compared to the amount of available credit you have. If your credit cards are maxed to their limits, your credit is already suffering.

In practical terms, a credit score that's heavily damaged by overwhelming debt isn't much better than a credit score that's damaged by bankruptcy. With bankruptcy, however, you're able to get a fresh start -- without the burden of all that debt following you around.

2. Bankruptcy is not a moral failing

Some people equate personal bankruptcy with a moral failure. It's not. It's a choice that you are legally entitled to make when your debts are overwhelming and you have no hope of getting out from under them any other way.

Bankruptcy is meant to be a financial tool, like any other. Not availing yourself of that tool when you should is a big mistake. Bankruptcy is the best way to end wage garnishments, lawsuits from creditors, debt collection calls and the other financial problems that come along with unmanageable debts and protect your family's financial future.

3. You can still have access to credit after bankruptcy

A lot of people mistakenly believe that filing bankruptcy means that they'll never have credit again. That's simply untrue. There's an entire industry of lenders out there who are in business simply to provide credit to people who need a second chance.

In addition, after you start making on-time payments and have shown your financial responsibility, your bankruptcy will begin to matter less and less. You'll eventually be able to qualify for credit cards and loans again from regular lenders within a few years.

Don't let fictions about the effects of a Chapter 7 bankruptcy scare you away from the process. Talk to an attorney about your situation to determine if bankruptcy is the right decision for you.

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