Over the next couple years, many Americans are having to make the decision of how they will eliminate this debt they have gotten themselves into. The average American has about $16,000 in credit card debt and when considering the average income has dropped to around $35,000 a year this works out to about a half a year salary. Throw in the interest in the average American will never be able to pay this debt off without winning the lotto. This is why, these folks should face the facts and consider filing bankruptcy. While, most people do everything they can to avoid filing bankruptcy, it offers the most powerful protection in the US for individuals trying to eliminate debt. Many people don’t know it but a bankruptcy filing has two protections, that when used properly with a bankruptcy attorney become lethal for the creditors. Creditors rather have an individual go into debt settlement then file for bankruptcy. They know once an individual files for Chapter 7 bankruptcy, they are not going to get anything.
When people get behind on their bills, initially, creditors act like they want to work with the debtor for a solution. The only solution that would really work is for the creditor to allow the debtor to pay off the debt with no interest or fees. Although, they act like they’re going to do this, but this is far from the truth. The last thing I creditor wants to hear is, “You’re going to have to talk to my bankruptcy attorney from now on.” This is why, they do everything they can to talk someone out of filing bankruptcy, including offering a charge off on the debt for a reduced amount. What most debtors don’t know is, that a charge off stays on your credit report for seven years. Usually, the main reason people try and avoid filing for bankruptcy is because they are worried about what it will do to their credit. Basically, paying half your debt shows up on your credit as long as filing Chapter 13 bankruptcy. Filing Chapter 7 bankruptcy will stay on your credit for up to 10 years, but this doesn’t mean that credit won’t be available. The creditors know that many individuals post Chapter 7 bankruptcy exit the process being debt free. As long as they are working and have a stable income, many believe they are a good risk because of being debt free and employed. Many of these creditors prey upon individuals after the bankruptcy discharge offering them credit immediately with higher interest rates. At this time, the debtor should enjoy the freedom of no debt and build their credit slowly until they can get competitive interest rates like everyone else.