For people in desperate need of financial rescue, declaring personal bankruptcy may be a very real and necessary avenue. Getting into financial turmoil can cause people to consider many different options, though when it comes to your financial future, it’s in your best interest to consider the pros and cons of each. Regardless of the form of bankruptcy protection you seek, the process itself can have some significant ramifications, each of which should be carefully considered before a decision is made one way or the other. Perhaps the most obvious consequence of claiming bankruptcy is that it will ruin your credit record for many years to come. Although you may already have a lackluster credit rating, filing for bankruptcy will only make matters worse. People that have filed for bankruptcy will tell you that it is almost impossible to obtain credit while the declaration is on your file. Even for those that are able to obtain credit, it nearly always comes at a significant cost. While it’s worth mentioning that credit can be slowly rebuilt during the bankruptcy process, it will be an uphill battle until the declaration is removed from your credit report. It’s also worth mentioning that declaring bankruptcy won’t erase all of your debt. In fact, even under Chapter 7, you are still obligated to pay back a portion of your debt through your non-exempt assets. Personal items of debt such as a student loan, tax payments and child support will still be there even after the bankruptcy process has ended. In other words, if these types of debts constitute the majority of your problems, bankruptcy protection may not provide the benefit you’re after.

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Homeowners facing foreclosure are in a difficult position. Many homeowners that are behind in loan payments (are soon to be behind) do not have the good credit necessary to refinance the mortgage or modify the loan agreement. If the homeowner can sell the property, he or she will be able to avoid foreclosure but will still lose the home. In some cases, homeowners are upside down in their mortgage, meaning they owe more than the property is really worth. If the homeowner were upside down in the mortgage, he or she would have to bring money to the table to sell the property. The sale price might cover the balance of the mortgage, but not the closing costs, realtor commissions, and repair costs. Most people facing this problem do not have the cash necessary to sell the property. In this bleak situation, homeowners have one option remaining for avoiding foreclosure. A short sale occurs when the lender accepts less than the balance of the mortgage to sell the property to a new buyer. The homeowner benefits from a short sale in many ways. For instance: Most homeowners do not have to bring any money to the table to sell the home in a short sale Some lenders will waive the right to a “deficiency judgment,” which means the homeowner cannot be pursued for the short fall in the future. The homeowner is able to avoid the damage a foreclosure causes to his or her credit score

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