Bankruptcy Pros and Cons
If you are considering bankruptcy, you should research all aspects of the process and the possible outcomes. This article is meant to be a very brief summary of the pros and cons of bankruptcy.
As people begin to experience anxiety over their inability to pay all of their bills because of the current economic climate, they begin to consider bankruptcy as an option. However, what is bankruptcy exactly?
A person files bankruptcy when he wants to obtain some relief from an overwhelming amount of debt. This happens when a person cannot pay all of his bills and needs a fresh start. Additionally, this type of legal proceeding is normally launched voluntarily. If the debtor wants to have his debts discharged, he files Chapter 7 bankruptcy. If the debtor wants to reorganize his finances and keep his assets, he files Chapter 13.
The main advantage to filing bankruptcy is that the person will be able to start fresh. The bankruptcy, once completed, will allow the debtor to take a breath and start anew. There will be no more harassing phone calls and letters and the debtor, hopefully, at this point, will be able to live within his means.
There are, however, some misconceptions related to bankruptcy. For starters, bankruptcy should not cause you to lose your job nor your social security benefits. Also, though your credit score most certainly will take a huge hit, it can be repaired.
The major issue with declaring bankruptcy is that your credit score will be dramatically affected and will instantly plummet hundreds of points. Because of this, you will likely be denied for all credit products for several years, possibly up to ten years.
Something else to keep in mind is that, depending on the bankruptcy chapter filed, some of the debtor’s assets may be lost in order to pay creditors. However, some assets are exempt, thankfully. You should discuss the different chapters of bankruptcy and the possible outcomes when you meet with a bankruptcy attorney.
Additionally, the cost involved needs to be considered. There is a filing fee for filing the case with the Bankruptcy Court as well as attorney’s fees which can range from $1,000 to more than $2,000. Therefore, when the total debt is just a few thousand dollars, it may be best to just deal with your creditors than to file bankruptcy.
In conclusion, it would be wise to seek professional counsel from a seasoned bankruptcy attorney if you are thinking about filing bankruptcy. An experienced bankruptcy professional will be able to explain the process to you and guide you to the best outcome for your situation.
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