The decision to file for bankruptcy is a very personal one, and it's one that should not be made until you have reviewed all of its pros and cons. Remember, too, that bankruptcy not only gets rid of many of your debts or manages them more effectively, but it has lasting effects on your financial future - positively and negatively.
Factors Favoring Bankruptcy
A number of factors should be considered when thinking about filing for bankruptcy. One important factor to keep in mind is that if you file for bankruptcy now and need to file again, you'll have to wait eight years.
Some "pros" of filing bankruptcy are:
- You may be able to save your home through bankruptcy
- Your unsecured debts such as credit card debt and medical bills are generally "discharged," or eliminated through bankruptcy
- Personal debt from the guarantee of business obligations and from mortgage deficiencies are generally eliminated through your bankruptcy discharge
- All collection activity, including foreclosure court cases, and including collection calls and letters, are immediately halted when your bankruptcy case is filed
- Your home, car and certain other property cannot be taken from you to pay your general creditors
- You may be able to eliminate or modify secured debt through a bankruptcy
- The Bankruptcy Code protects you from future collections processes such as repossession, foreclosure and frozen bank accounts during your bankruptcy case. In fact, any creditor that violates the law can be held in contempt of court
- Chapter 13 Bankruptcy may allow you to strip your 2nd mortgage on your home
Factors Against Bankruptcy
Be sure to look at the "cons" of bankruptcy as well. Filing without knowing the consequences in advance could be an unwelcome surprise. Here are some factors to consider:
- If you own nonexempt property (i.e. property that exceeds the personal allowance that is granted to you under bankruptcy law), it could be liquidated or sold to pay off creditors, if you cannot afford to buy it back yourself. During your Free Consultation, we will look at your personal property to see if you will have an issue
- A bankruptcy discharge is permitted to be reported on your credit history for several years. On the other hand, if you continue to accumulate late payments, your credit score will drop anyway, if you do not file a bankruptcy
- The legal costs for filing bankruptcy should be a factor that you consider in making the decision to file, or not. At my firm, I will work with you to see if we can work out a suitable payment arrangement.
Is Bankruptcy Necessary?
Only you can decide if bankruptcy is right for your situation. For many who face problems that bankruptcy can eliminate, a bankruptcy discharge and the Fresh Start that flows from it might have an incredibly positive effect on their future financial well being.
To help you decide if bankruptcy is the route you want to take, please contact us to schedule your Free Consultation.
Questions to Ask Scott W. Spradley
- Are there ways to work with collectors safely before filing bankruptcy?
- What property can I keep if I file bankruptcy?
- When is the best time to file bankruptcy?
- What debts will survive a bankruptcy?
- Do I have a better chance of keeping my house if I file bankruptcy, or if I do not?