There are so many reasons why someone would want to file bankruptcy. However, there are also some reasons somebody wouldn’t.
In premise, it’s up to the person to weigh the pros and cons of bankruptcy to determine whether or not it’s the right decision for them.
In this article, we will cover both, the advantages of bankruptcy and the disadvantages. So that you can make an educated opinion when choosing.
Keep reading to learn more.
Pros And Cons of Bankruptcy: Advantages
First and foremost, Chapter 7 bankruptcy does not have a requirement for debt amount, meaning you can file for relief at any point. However, even if the case does get converted to Chapter 13, you will still be able to improve your financial circumstances by acquiring better terms for paying off debts. Not to mention, with Chapter 13, you keep all of your property.
If you do not owe any money on the debts that typically survive bankruptcy, the number of and amount of the debts that the court can relieve you from paying is “practically” infinite.
You can avoid any of the harsh limitations against refiling for bankruptcy by observing all court rules and orders, and by not asking to have the case dismissed when the credit asks for relief.
Even if the limitations (more on this later) apply to you, they do not last forever. You’ve preventer refiling for half a year. If you received a discharge via Chapter 13, at least 70% of your debts (unsecured), the six-year bar will not apply to them.
Bankruptcy can also prevent lenders from pursuing aggressive collection. Bankruptcy will in fact mediate most of your financial responsibilities, but to suspend child support or alimony, only a family court can do so.
Chapter 13 Bankruptcy Ain’t So Bad
You can only file under Chapter 7 one time in six years. However, you can always opt-in for a Chapter 13, if there’s another disaster. You can do so repeatedly, however, each filing will in fact appear on your credit reports.
Bankruptcy is supported by lenders who support bad risks, even though that might be an unfair description of someone who is attempting to resolve their financial issues.
You will be able to obtain new credit lines within a single year, but most often several years after filing. Keep in mind that the interest rate will be significantly higher than usual.
State exemptions often allow you to keep most of your things, in most cases, coverage exceeds property value. You also get to keep your wages/salary that you will earn, as well as property you buy after filing.
Even though a bankruptcy stays on your record, the time to complete it, from filing to relief, only takes 3 months (max 6). If you choose to go against Chapter 7, your defaults, missed payments, lawsuits and repossessions will hurt your credit and might be more difficult to explain to a potential lender in the future.
And that’s that for the benefits of bankruptcy. Let’s continue to the next section for the cons of bankruptcy.
Pros And Cons of Bankruptcy: Disadvantages
First and foremost, if you file for Chapter 7, but you have an excessive quantity of disposable income, the court might convert your case to Chapter 13, thus you being no longer free from most debts, and leaving you responsible for paying off the debts over the course of several years
You might still have to pay your debts, such as a mortgage lien, even if the bankruptcy is successfully completed. Furthermore, you cannot file for Chapter 7, if a previous Chapter 13 or 7 has been dismissed (in the last 6 months).
This is because you have violated a court order OR you have chosen a dismissal after a credit asked for relief. You also cannot file for Chapter 7 if you simply went through proceedings for either Chapter in the past 6 years.
Remember that you will have to explain yourself in detail to the trustee and judge about how you found yourself in this financial pithole. Bankruptcy does not exempt people from student loans. Bankruptcy does not relieve people from responsibilities to pay child support or alimonies.
Financial Draught Is Imminent
Filing for bankruptcy can make it harder to do again later if something worse happens. If you complete the process under Chapter 7, you cannot file again for six years. The period is counted from the date of the last filing.
Bankruptcy will most likely make it impossible for you to get a mortgage, especially, if you don’t already have one.
You will lose access to all of your credit cards. You will lose all of the property that you own (if not exempt by the trustee). You will also lose your luxury items.
Bankruptcy will in fact ruin your credit for a while. A Chapter 7 bankruptcy can stay on your credit record for 10 years at a time. For more help in this area of law, you will need a specialist attorney.
Never proceed with bankruptcy without the help of an experienced and knowledgeable lawyer for you are placing yourself under great risk of the judicial system.
Bankruptcy Done Right
Now that you know about the pros and cons of bankruptcy, you are well on your way to deciding if it’s the right decision for you. In any case, whatever you choose to do, it will be the right thing to do.
This is your life, your financial situation, and your decision – so choose wisely. As you get to pick, you also get to reap or suffer the consequences. If you’re interested in learning more about similar topics, feel free to check out our filtered categories at the top of the website.