If you are struggling with debts and dealing with creditor harassment, you are not alone. Many Americans are facing the same situation because they are unable to meet their financial obligations due to the loss of a job, a medical illness or the loss of a spouse. Whatever the reason, stress from unpaid bills is draining both emotionally and physically.
Filing for bankruptcy relief is often the best solution for individuals and couples who are facing debts that they cannot afford to pay. Most people feel an immediate sense of relief once they make the decision to file a bankruptcy. There are numerous pros and cons of bankruptcy, but the advantages of filing bankruptcy outweigh the disadvantages. Let’s discuss some of these pros and cons so you can see how filing a bankruptcy case can help solve your financial problems.
Pros of Filing Bankruptcy
The pros and cons of bankruptcy are numerous; however, as you will see, the benefits of bankruptcy far exceed and outweigh any disadvantages.
Emotional relief – As we discussed above, the immediate and most noticeable benefit of filing bankruptcy is emotional relief. The stress and anxiety of dealing with unpaid bills, angry bill collectors, threatening letters and even lawsuits is alleviated once you make the decision to file for bankruptcy. Even though the bankruptcy process can be complicated, your bankruptcy attorney will guide you through each step to help you recover from the emotional stress, depression, anxiety and discouragement that is caused by financial problems.
Relief from bill collectors – Once your bankruptcy case is filed, the automatic stay provisions within the Bankruptcy Code prevent creditors from harassing or even contacting you regarding debts you owed at the time the bankruptcy case was filed. Creditors are barred from sending threatening letters, making harassing telephone calls and even filing or continuing a lawsuit. Creditor harassment stops when you file for bankruptcy.
Stop foreclosures and repossessions – If you are behind on your car or house payments, filing Chapter 13 bankruptcy stops foreclosure sale or vehicle repossession immediately. The past due payments are included in your Chapter 13 plan of reorganization, to allow you to recover financially while retaining your home and car.
Fresh start – Filing a bankruptcy case gives you the fresh start that you need, both financially and emotionally. By discharging or “wiping out” your debts, a bankruptcy erases your personal liability for those debts. These debts include credit cards, medical bills, judgments, foreclosure deficiencies, old utility or rent bills, personal loans and even some older tax obligations. Once the debt is discharged, a creditor can never try to collect that debt again.
Reorganization of debts – In a Chapter 13 bankruptcy, you can reorganize and consolidate your debts into a manageable monthly payment. The benefits of a Chapter 13 bankruptcy case include spreading out debts over a longer term, lowering or eliminating interest on some debts, stopping wage garnishments and even allowing a debtor to catch up on child support or alimony arrearage.
Cons of Filing Bankruptcy
When balancing the pros and cons of bankruptcy, the cons are usually blown out of proportion by creditors or others who wish to deter individuals from filing. The disadvantages are not as ominous as they are portrayed.
Losing property – This is usually the number one worry of someone filing for bankruptcy relief. However, in most cases, debtors lose little, if any, property when they file a bankruptcy case. Federal and state laws provide bankruptcy exemptions that protect assets from being seized by creditors or a bankruptcy trustee. In most Chapter 7 cases, all of the debtor’s assets are exempt. In the case of a debtor who may have property they want to protect, he or she can file a Chapter 13 bankruptcy case to retain the asset.
Credit scores – Many debtors often worry about how a bankruptcy will affect their credit rating. While a bankruptcy filing will remain on your credit history for seven to ten years, the negative effect of the bankruptcy will decrease each year. Because the debtor is no longer legally liable to repay the debts after the bankruptcy discharge is granted, most credit scores will improve after one year. Most debtors find that filing a bankruptcy helps them improve their credit rating faster than if they had ignored the debts and allowed them to remain in a charged-off (bad debt) status on their credit report.
Cost of filing bankruptcy – Filing for bankruptcy can be costly for some, but it depends on the complexity of the case. However, the cost of filing bankruptcy is often much less than the debtor will pay if he or she tries to restructure debts to pay them in full, with interest, or if the debtor tries to obtain a debt consolidation loan.
The pros and cons of bankruptcy will differ for each individual debtor. Consulting a bankruptcy attorney is the first step in resolving your financial problems. Request a free bankruptcy consultation to have all of your questions answered and to understand how bankruptcy can benefit you.