Filing for bankruptcy is an agonizing process. While it can help settle most of your debts, it has severe consequences such as affecting your eligibility for future credit, your reputation and self-esteem and also your relationships. However, in the short-term, it can improve the quality of your life and potentially prevent you from losing vital assets such as your car, home or other essentials.
Therefore, it is advisable to view bankruptcy as the last option to manage your debts owing to its far-reaching and long-lasting consequences. It is therefore advisable to carefully consider the pros and cons of bankruptcy before you make up your mind.
Pros of Filing for Bankruptcy
The primary advantage of filing for bankruptcy is the fact that it can clear most of your personal debts. This means such debts are forgiven, hence you will no longer be held personally liable for them. Such debts are considered as having been legally waived.However, you can also file for bankruptcy under Chapter 13, which ensures you can reorganize outstanding obligations and merge them to pay them as a single monthly payment. This smooths out the whole repayment process by making it more manageable and affordable.
Secondly, if you file for bankruptcy, you will be granted with what is known as an automatic stay. This means that all your creditors whom you have any outstanding debts will be forbidden from initiating any asset seizure attempts on your property in order to settle their claims. Moreover, all those heart-attack inducing letters or phone calls from credit collection agencies will cease, giving you peace of mind.
Moreover, you will not have all your property confiscated once you file for bankruptcy. In both state and federal laws, there is something known as bankruptcy exemptions. These are assets that are shielded from seizure by bankruptcy trustees when executing provisions of Chapter 7 bankruptcy cases. This means you can still retain possession of vital items such as your jewelry, house, car, clothing and other personal assets.
Finally, you won’t be dismissed from your job if you file for bankruptcy, contrary to widely-perceived belief. Bankruptcy laws state that you should not be discriminated against in your workplace if you file for bankruptcy.
Cons of Filing For Bankruptcy
One of the primary drawbacks of declaring bankruptcy is that while it can pull you out of indebtedness, it won’t discharge all your obligations. Some of the debts that are required to be paid after declaring bankruptcy include student loans, the latest back taxes, fines imposed by government agencies and child support and alimony.
Secondly, while you are allowed to retain your exempt property if you file for bankruptcy under the provisions of Chapter 7, you will lose what is deemed as non-exempt property. Based on your current financial situation, this could include assets such as stocks, cash, bonds, cars and your house.
Moreover, filing for bankruptcy will affect your credit ratings for 10 years, quite a considerably long time. This makes the process of securing a loan in future a difficult process. Even if you still obtain a credit card or a loan, the interest rates are likely to be higher.
Lastly, the whole process of declaring bankruptcy is expensive. There are several costs associated with it such as filing fees, credit counselling fees, bankruptcy trustees fees and attorney charges.