Avoid Bankruptcy With Credit Counseling

It may seem shocking to you that the total debt in the US works out to be $7,800 for every citizen if we divide the total consumer debt amount of 2010 ($2.4 trillion) by the total US population. If you are also trying to cope with the burden of debt and planning to file for bankruptcy, then stop and think again. Following the Bankruptcy Abuse and Consumer Protection Act of 2005, filing for bankruptcy had become a difficult process for individuals. Before filing, you have to provide evidence that you have already gone for credit counseling and there is no other alternative left.

Why is Credit Counseling Necessary before Filing for Bankruptcy?
The government requires credit counseling evidence before accepting your bankruptcy filing, in order to prevent fraud. What was happening in the past was that some people, unable to pay off their debt, would file for bankruptcy under Chapter 7. According to this chapter, all assets of the debtor were sold and the income was distributed amongst the lenders as full and final settlement. Any remaining debt was no longer considered the responsibility of the debtor.

However, some people would simply hide their assets and other income sources from the eyes of the law. Thus, they would be in a relatively better position at discharge than before. But now, under the Act, it has been made compulsory for a defaulter to attend credit counseling to check whether there are alternative means to resolve the debt.

What Does a Credit Counseling Firm Do?
A credit counseling firm can help you and the government in the following ways:

* It will ask you and investigate your financial sources, monthly income and the actual debt amount.
* It will make an estimation of the value of your assets.
* It will talk to your lenders regarding some sort of settlement.
* It will attempt debt consolidation with a financial institution so that your loan can be managed in fixed, easily payable, monthly installments.

Finally, if nothing works out, it may get you the consent of the authorities to file for bankruptcy.

Filing for insolvency is only the last resort, and must be avoided as far as possible because it can harm your credit score. So, think about your future and look for the possible alternatives.

Practical Debt Relief, a US based credit counseling company, has many success stories to its credit. Visit www.practicaldebtrelief.com/ to hire the services of their experienced professionals.