Crimes of Persuasion

Schemes, scams, frauds.

Deceptively Using Bankruptcy to Repair Credit

In your effort to get solvent, be on the alert for ads that offer seemingly quick fixes. While the ads pitch the promise of debt relief, they rarely say that their relief may be in the form of bankruptcy.

Although bankruptcy is one option to deal with financial problems, it's generally considered the option of last resort because of its long-term negative impact on your creditworthiness. A bankruptcy stays on your credit report for ten years, and can hinder your ability to get credit, a job, insurance, or even a place to live.

The truth is you can help yourself to re-build a better credit record. Start by contacting your creditors as soon as you realize you can't make the payments. If you need help working out a payment plan and a budget, contact your local credit counseling service. Also, check with your employer, credit union or housing authority for no- or low-cost credit counseling programs.

If none of these options is possible, bankruptcy may be the likely alternative. In the U.S. there are two kinds of personal bankruptcy: Chapter 13 and Chapter 7. The consequences of bankruptcy are significant and require careful consideration.

Chapter 13, also know as a reorganization, allows you to keep property, such as a mortgaged house or car, that you otherwise might lose. Reorganization may allow you to pay off a default during a period of three to five years, rather than surrender any property.

Chapter 7, known as a straight bankruptcy, involves liquidating all assets that are not exempt in your state. Exempt property may include work-related tools and basic household furnishings.

Some property may be sold by a court-appointed official or turned over to creditors. You can file for Chapter 7 only once every six years. Both types of bankruptcy may get rid of unsecured debts and stop foreclosures, repossessions, garnishments, utility shut-offs, and debt collection activities.

Personal bankruptcy usually does not erase child support, alimony, fines, taxes, and some student loan obligations.

Wells of Justice is a group of victims and victim advocates working to inform the public on what they feel is a miscarriage of justice operating through the U.S. Bankruptcy Court in Rockford, Illinois. Visit their web site at

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