Filing bankruptcy is a very large financial decision that can impact quite a few different things. Bankruptcy is a court process that was put in place to help people to repay or completely eliminate their debts while being protected by bankruptcy laws. It helps people to prevent losing their homes or other assets as well as improving the quality of their life in a short term matter, however the long term effects are quite substantial. Each individual case is different, but gaining a better understanding of how bankruptcy will effect you may help you to make your decision.
The Advantages Of Bankruptcy
1. All Collections Stop
People who are far into debt are well aware of just how intrusive and persistent collection calls can be. When you file bankruptcy your attorney handles all of these collection inquiries and shields you from having to deal with them any further.
2. Prevents Loss Of Home Or Car
One of the first things that collections agencies will try to go after is your assets. This includes your home and vehicles. When you file bankruptcy, your essential assets become protected and they cannot be taken from you.
3. Freedom From Debt
The majority of large debts that you owe, such as credit cards or medical bills, are discharged, freeing your from the stress of paying them.
4. Help You Begin Rebuilding Credit
While bankruptcy is a very bad mark against your credit, it stops all of the continuous negative effects that debt causes. This prevents your credit score from constantly lowering and allows you to focus on building it back up.
5. No Discrimination
Underneath the bankruptcy laws in America, a person cannot lose their job for filing bankruptcy. This is a great relief to many people and helps to relieve the stress surrounding the mess of bankruptcy.
The Disadvantages of Bankruptcy
1. Not All Debt Forgiven
While the large majority of debts can be discharged when you file bankruptcy, there are some debts that are yours forever. Some examples of these include student loans, taxes owed, or child support payments.
2. Long Lasting Credit Damage
Normal things that are put onto your credit report are wiped away after seven years. Bankruptcies however are stained on your credit for ten years. This is a significant difference in time, especially when it comes to your credit.
3. Impossible To Get More Credit
Things like getting a mortgage, car loan, or any other form of financial lending, becomes nearly impossible after you file bankruptcy. Your credit becomes “blacklisted”.
The sheer fact that you have been forced to file for bankruptcy in the first place is enough to bring many people down into the dumps.
5. Not A Cheap Process
There are many costs that are associated with filing bankruptcy. You have to hire a capable attorney to ensure that you get the outcome you are striving for, you also have to take on the responsibility of court costs, filing fees, and credit counseling fees.
6. Non Exempt Property Is Gone
Some things that you own, such as vacation homes or second vehicles, will likely be sold off in order to pay off the creditors that you are indebted to. This can include personal belongings as well, like family heirlooms or jewelry.