Many Americans struggle with debt. There are many ways to help manage debt, but when it overwhelms you, bankruptcy may be the best choice to give yourself a new start. With bankruptcy, you can eliminate much of your debt. If you would like to learn more, keep reading to learn four pros and cons of filing for bankruptcy.
Pro: You Can Eliminate Most Debt
Many Americans struggle with consumer debt, which largely includes credit card debt. However, because so many Americans don't have insurance or are underinsured, medical bills are also problematic for many people. Luckily, credit card debt and medical bills can be discharged during bankruptcy.
Other debt like car loans, home loans, personal loans, store credit cards, and much more can also be discharged during bankruptcy. Naturally, if you discharge your car or home loan, the lender will repossess the car/property.
There are, however, many types of debts you cannot eliminate via bankruptcy. These include taxes, child support, alimony, student loans, fines related to crimes, etc.
Pro: Your Attorney Does Most of the Work
A lot of work goes into filing for bankruptcy, but your attorney will do most of it for you. Of course, you will have to make a list of all your debt and provide it to the attorney. Once you have all the numbers, the attorney will determine if you need to liquidate any assets and/or create a repayment plan.
Typically, your only responsibilities are to complete a debtor education course and to attend the meeting of creditors. A debtor education course simply helps teach you about budgeting and financial planning. The meeting of creditors usually involves answering a lot of basic questions to confirm your identity and ensure everything your attorney did is correct.
Con: You May Not Qualify for Chapter 7
Chapter 7 bankruptcy is often what people picture when they think of bankruptcy. With Chapter 7, if you have assets, they are liquidated to pay off your debt. If you don't have assets, nothing is liquidated. This type of bankruptcy is ideal because it is cheap and fast. Unless you have assets, you don't have to repay any debt, and the process is over within a few months.
If you don't qualify for Chapter 7, you may have to file Chapter 13 bankruptcy. With Chapter 13, you will craft a repayment plan to repay some of the debt. This repayment plan will last three to five years. Therefore, Chapter 13 bankruptcy may cost you more overall because you must repay some of the debt.
Con: Your Credit Will Be Negatively Impacted
Your credit will be affected by a bankruptcy, but if you are already considering bankruptcy, your credit may already be affected. Paying bills late, not paying bills, etc., all affects your credit score. Therefore, in some case, bankruptcy can actually help your credit in the long run.
True, the bankruptcy will appear on your credit report, but after 10 years (seven for Chapter 13 bankruptcy) the bankruptcy is removed from your credit report. Before the bankruptcy is removed, however, you can start improving your credit. One way is to get a secured credit card. A secured credit card gives you the same benefits as a regular credit card, but you have to pay a security deposit, making it less risky.
If debt has taken over your life, bankruptcy may be the best choice to give you back control over your finances. While bankruptcy can affect your credit, lots of unpaid debt can destroy it too. If you would like to learn more, contact a bankruptcy attorney in your area today.
Contact a firm like Havner Law Firm to learn more.Share