What Are The Pros and Cons of Bankruptcy?

pros and cons of bankruptcy

What Are The Pros and Cons of Bankruptcy?

Deciding whether or not to declare yourself bankrupt can be tricky. Read this post for a detailed breakdown on the pros and cons of bankruptcy.

Are you considering bankruptcy? You’re not alone.

Millions of people fall deep into debt every year. They may have expensive medical bills, insurmountable credit card debt, or even unemployment.

Bankruptcy can help you get back on financial track. But it’s often viewed as a last resort for people in debt. New data shows that 73 percent of Americans have such a large financial burden that they carry debt to their grave.

But is bankruptcy really that bad? Deciding whether or not to declare yourself bankrupt can be tricky. Read this post for a detailed breakdown of the pros and cons of bankruptcy.

Why Bankruptcy?

Bankruptcy is an option for people who have accumulated massive amounts of debt. Quite simply, people choose bankruptcy because they can’t pay off this debt.

There are many common reasons why people go bankrupt: medical expenses, income reduction, job loss, divorce, and student loans.

There are many smart ways to pay off debt. But bankruptcy can be the most effective. It will stop lawsuits, collection calls, and even wage garnishments.

There are a variety of forms to choose from when filing for bankruptcy. The most common types are Chapters 7 and 13. A bankruptcy attorney will help you determine which the pros and cons of bankruptcy types.

Pros

There are many reasons people choose to file for bankruptcy. One of the most common, however, is that it gives them a fresh start.

Automatic stay is a feature in all forms of bankruptcy. This feature legally protects people from debt collection.

You have to sell off many of your assets in order to pay your debts. However, you will be free from bankruptcy after three years. At this point, you will be free from your debts.

That means you are no longer financially obligated to make payments on any loans, credit cards or any other financial obligations.

Cons

Bankruptcy doesn’t magically relieve your debt without consequences. What’s the catch?

Bankruptcy can have a big impact on your credit score. It’s common for people to take a credit hit of a few hundred points after declaring bankruptcy. However, people who fail to pay off debts already have poor credit scores.

Bankruptcy also stays on your credit record for an extended period of time. The period is 10 years for Chapter 7 and eight years for Chapter 13.

This credit hit could prevent you from getting a job. It’s becoming more common for human resource teams to check credit scores on job candidates. 47 percent of HR teams run credit checks on selected candidates.

Another downside to bankruptcy is the loss of assets. Creditors can buy off your home and other personal assets during bankruptcy.

Most of all, bankruptcy is unpleasant. It can be difficult to face harsh realities about your financial situation. But sometimes bankruptcy is the best solution to a difficult problem.

More Pros and Cons of Bankruptcy

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