This article discusses the advantages and disadvantages of bankruptcy and how it can affect your decision on whether to file for bankruptcy or not.
The advantages of bankruptcy
If bankruptcy has been filed for the right reasons, it does have advantages. Fist, it releases the borrower from the stress of having creditors constantly demanding repayment. In fact, some creditor are known to harass borrowers and such undignified treatment may rob your peace of mind and your privacy.
Once you have finally filed for bankruptcy, all creditors are no longer allowed from contacting you or from pursuing any kind of debt collection practice.
Once you get approved for a Chapter 7 bankruptcy, you can be free from all your debts. This only means that you can have a fresh start once again and have a life that’s free from the burden of repayment.
If ever you do not qualify for Chapter 7 bankruptcy, a Chapter 13 bankruptcy would put you under a repayment plan. A certain percentage from your monthly salary will be deducted as payment for your debts. Even if Chapter 13 does not completely free you from obligations, undergoing a bankruptcy repayment program can still be a great help in managing your debts.
The disadvantages of bankruptcy
Are there any negative effects when filing for bankruptcy? What are the consequences once you have chosen to file for bankruptcy?
Basically, a bankruptcy record is a derogatory mark that will stay on your credit report for 7 year. Imagine how insurers, future creditors, landlords or potential employers would react if they find out that you just went through bankruptcy. The road to recovery can be a slow process, even if your credit rating and status can be improved over a period of time.
Going through a bankruptcy procedure also requires a considerable amount of money and time. Nowadays, you must hire a bankruptcy lawyer in order to prepare your bankruptcy documents. Usually, your best choice would be hiring an attorney who will ask for a considerable service charge.
Are you guaranteed to get an approval after filing for bankruptcy? Under the new bankruptcy law, you have to pass the “Income Means Calculation Exam” in order to find out if you are qualified for Chapter 7 bankruptcy or Chapter 13 bankruptcy.
Take note that in case you failed o qualify for Chapter 7 bankruptcy, you can still qualify for a Chapter 13 bankruptcy that will put you under a 5-year debt.
Should you consider filing for bankruptcy?
Your credit counseling agency must help you decide if filing for bankruptcy is suitable for you. If your credit counselor advises that you go for the alternative steps instead, then, you have to be cooperative. You must be prepared to take the challenge of being able to resolve your debts even without filing for bankruptcy.