subject: Considering Bankruptcy? The Pros And Cons Involved [print this page] If you are considering bankruptcy then it is strongly advised that you do your research before going for it. This article provides a brief introduction to the process, and looks at some of the pros and cons.
In tough economic times like those we are currently experiencing, many people begin to struggle under the weight of their debt. With incomes decreasing and the bills starting to stack up bankruptcy can appear to be a tempting option. But what exactly is it?
Bankruptcy is essentially a business or individual declaring their inability to pay its creditors, and is usually carried out voluntarily to obtain relief from debt, through either financial restructuring or discharging of the debt.
The first thing to understand if you are considering bankruptcy is that there are several different types of bankruptcy in the USA. The most common types utilized by individuals are Chapter 7 and Chapter 13. Chapter 7 filings do not usually include assets, whilst Chapter 13 filings allow consumers to adjust their finances.
The Pros of Bankruptcy
Those who are considering bankruptcy do so mainly for the reason that they can essentially start afresh, with the burden of debt removed from their shoulders. Unsecured debts will be discharged, and financial stress and creditor harassment will come to an end.
Although not an advantage as such, there are several downsides that those considering bankruptcy will be happy to learn are simply not true. You will not lose your job or your social security benefits by declaring yourself bankrupt, and though your credit rating will suffer, it will not be damaged beyond repair.
The Cons of Bankruptcy
Perhaps the main problem with declaring yourself bankrupt is that your credit report is severely damaged, and you can almost give up hope of being accepted for any kind of credit product for the next few years. This period is usually ten years, though can sometimes be less.
Depending on the type of bankruptcy it is also possible that you will lose some or all of your property. Some properties can be classed as exempt, however, and a bankruptcy attorney can advise you further on this matter.
There is also the cost involved in actually making the filing. Attorney fees can cost upwards of $1,000 and sometimes more than $2,000. This means that in cases where the total debt is just a few thousand dollars, there are often better debt strategies - such as dealing directly with the creditors.
Anyone who is considering bankruptcy should seek professional advice before taking any further steps. This article, however, has hopefully provided a brief introduction to some of the pros and cons associated with the action.
