Bankruptcy: pros and cons – FindLaw
Declaring bankruptcy may seem like a big step in the wrong direction. Filers find debt relief, but also face new challenges in rebuilding their credit and securing their loans. It is also common to adjust to a reduced lifestyle after bankruptcy.
But bankruptcy also offers tremendous relief to those buried under unsustainable levels of debt. The dreaded phone calls and letters demanding payment will cease as soon as bankruptcy is declared.
Here is a list of pros and cons to consider before declaring bankruptcy. See Bankruptcy Basics for additional articles and resources, or speak to a bankruptcy lawyer near you if you need legal assistance.
|Most tax debts are not dischargeable||Bankruptcy can make old tax obligations disappear (more than three years)|
|Bankruptcy will reduce your credit until you work to rebuild it||Bad debts, defaults, repossessions and lawsuits will hurt your credit – bankruptcy can often be the easiest option|
|You have to wait years between bankruptcy filings (if you need them again at a later date)||You can apply for a Chapter 13 plan if there is another financial disaster before you qualify for Chapter 7 again.|
|Bankruptcy Won’t Eradicate Student Loan Debt||Nothing will get rid of student loan debt, but bankruptcy will prevent your lenders from taking aggressive collection action.|
|You will lose your current credit cards||Judges, lawyers and trustees have seen and heard bankruptcy stories much worse than yours|
|Bankruptcy may at first seem conquered||Bankruptcy gives you a fresh start|
|It can be uncomfortable to explain to a judge, a trustee and a lawyer how you ended up in your financial situation||Harassing phone calls from creditors, letters, repossessions, canceled credit cards, denied debit authorizations and lawsuits will cease|
|Your name will be public in court records once you file||Some lenders specialize in lending to “bad risk” clients (that’s their term, but it’s an unfair qualification to make of someone who has taken an important step in resolving financial difficulties)|
|You may have to wait or take extra steps to get a mortgage||Most state exemptions allow many things you own to be exempt from bankruptcy|
|You can lose luxury goods|