Bankruptcy: The Pros And Cons
Bad Debt Consolidation by splinder
Filed under Bad Debt Solutions, Bankruptcy
Personal bankruptcy is agonizing and sometimes forces you to admit self defeat. It affects your goodwill not only in the market, but in personal relations as well. On a brighter side, the purpose of bankruptcy is to provide an individual the chance to start afresh. It also protects the essential assets of a bankrupt, such as house and car. However, the bankruptcy pros and cons should be weighed thoroughly as it may not solve all your debt and credit problems. The consequences depend upon the type of bankruptcy one files for.
If you file a Chapter 7 bankruptcy, you can discharge more debts as compared to other types. However, it involves liquidation of your assets. Also, there are strict eligibility criteria for Chapter 7. This means that one might need to file for Chapter 13 instead. This form of bankruptcy does not discharge debts but reorganizes them. Chapter 13 will, however, come off your credit record earlier than Chapter 7. Chapter 11 is for big corporations and entails exorbitant costs. It is advisable to try to negotiate with creditors before filing for bankruptcy.
Bankruptcy Pros And Cons: Pros
Bankruptcy can relieve you of stress in the following ways:
- Filing for bankruptcy puts a cessation to the attempts of credit collection by creditors.
- Debtors are protected against garnishments, foreclosures and repossessions.
- They do not have to answer constantly annoying and, sometimes even threatening, phone calls.
- Most states protect essential assets, including one’s home and car, from being liquefied.
- The interest rate on the terms of loans, such as mortgages, can be lowered, as they can be altered to reflect current property value, in Chapter 13.
Bankruptcy Pros And Cons: Cons
A bankruptcy filing stays on your credit report for 10 years, making it difficult to acquire credit, buy a home or car, get life insurance, or sometimes even get a job.
- Bankruptcy brings an inevitable destruction of your credit and goodwill in the market. This will make it very difficult for you to get credit and loans in the future.
- Student loans, child support, alimony, taxes and other priority debts are not discharged even after bankruptcy.
- In case of secured debts, your property can be repossessed by creditors.
- You bank accounts would be closed or frozen, and you will also have to give up your credit cards.
- In case you are forced to file for Chapter 13, you will be unable to discharge most debts. These will be restructured and have to be paid over time.