When you’ve reached your financial limit and don’t know how you can possibly pay all your debts, bankruptcy may well be your best option. Bankruptcy can provide a fresh start and big weight off your shoulders. Take a look at some of the advantages and disadvantages of bankruptcy.
Benefits of Filing for Bankruptcy
When you decide to file for bankruptcy, you have three major advantages over your current situation.
No More Calls from Creditors
When you owe a company money, they often make themselves as annoying as possible until they get the money back from you. You may receive calls from creditors several times a week, if not several times a day, and you can only avoid the telephone for so long.
When you successfully declare bankruptcy, your creditors get an immediate order to stop contacting you and demanding payment. Your phone will stop ringing and you can breathe easier.
Elimination of Many of Your Debts
After your successful bankruptcy case, the court will discharge some, if not all, of your debt. You never have to worry about paying back those debts. Those sums are off your record, and you can stop negotiating payment plans, fighting interest rates, and trying to scrape funds together every month. Not all debt goes away. In most circumstances you will not be able to eliminate student loans, child support, spousal maintenance and taxes (taxes can be eliminated if old enough).
New Start for Your Finances
With the weight of those debts off your shoulders, you can start fresh with your finances. Now that you don’t have to worry about payments, you can build up your savings, achieve a better quality of life, and provide more for your family.
Drawbacks of Filing for Bankruptcy
Effect to Your Credit
Credit agencies are required to list bankruptcy on your credit report. That notice will remain visible for up to 10 years depending on the type of bankruptcy you file for. However you will get offers to buy cars a soon as you file bankruptcy. You will likely receive credit card offers within about 6 months of the completion of your case if not sooner which if used properly can help you reestablish your credit. You may be able to purchase a home through FHA a year after your bankruptcy is done if you have reestablished your credit and are employed. In Chapter 13 Bankruptcy you may be able to purchase a home while your case is still active.
Protection of your Assets
Each state either has its own list of assets that are protected or uses the Federal Government list of protected assets. You will need to contact your attorney to see which assets are protected and which are not.
When to File for Bankruptcy
If you have decided that bankruptcy is an option then you need to consult with a bankruptcy attorney to determine whether you should file a Chapter 7 Bankruptcy or a Chapter 13 Bankruptcy and when would be the best time for you to file.