Bankruptcy should be consumers option of
last resort when they’re facing debt. It’s a very serious step and can have
long-range consequences. Bankruptcy will stay on consumers
records for a decade or more, therefore, it can affect a consumers’
ability in the future to get a house, uh… to get loans to get uh… a
car, to have any kind of financing, so it shouldn’t be something taken lightly. uh… bankruptcy does have some options
uh… and some benefits especially for consumers who want to keep their house but it should be something that
consumers consider only if every other attempt at voluntarily working things
out with the creditors hasn’t done the trick. Bankruptcy doesn’t mean that a consumers
slate is wiped clean. They’re going to still have to pay some portion
of those debts… they may even have to pay taxes on the amount that was
forgiven. So, that’s another reason to remember
that it’s a serious step consumers should take only if nothing else has worked. A lot of people are worried about the tax
implications of bankruptcy, or uh… of other things they might do. If you
negotiate with your creditors, and they forgive part of the debt, uh… you can be taxable on that. In the mortgage crisis they’ve changed the law
on that so there is sometimes when you were, when you’re not. But the general
rule is if your creditors say, “Okay, we voluntarily wipe out the debt,” you get a tax bill at the end of the
year on that, so you need to be careful.