Bankruptcy Advantages and Disadvantages
Declaring bankruptcy is a right granted by the United States Constitution. It allows individuals or businesses that are unable to pay their debts to resolve their financial difficulties and start rebuilding their credit. Filing for bankruptcy has many advantages and disadvantages, depending on your situation. This article will discuss the pros and cons of filing for bankruptcy to help you decide if bankruptcy is right for you.
What Are the Disadvantages of Filing for Bankruptcy?
Because filing for bankruptcy may affect your finances for many years, you should carefully weigh all of your options before filing. Some disadvantages are:
- If you are unable to exempt all of your personal property or real estate under the bankruptcy exemptions, some of your property may be seized by the bankruptcy court and sold to pay your creditors.
- Your bankruptcy will be noted on your credit report for 7-10 years.
- Many credit card companies will automatically cancel your credit cards when you file for bankruptcy.
- A recent bankruptcy filing may hinder your ability to obtain a mortgage or loan for many years.
- Tax refunds from federal, state or local governments may be denied based upon your bankruptcy.
- If you are looking for a job or housing, some employers or landlords may look unfavorably on a recent bankruptcy filing.
- You may be precluded from being named a director for limited liability companies.
- After your bankruptcy, some debts, such as student loans, many types of tax debts, liens, support orders, or fines may be non-dischargeable.
What Are the Advantages to Filing for Bankruptcy?
Despite its disadvantages, in many cases, filing for bankruptcy is the correct course of action. The advantages of filing for bankruptcy are:
- Filing for bankruptcy will trigger the automatic stay, preventing creditors from taking action to collect their debts, including calling you, suing you, or sending you letters.
- You may be able to discharge your obligation to repay any of your dischargeable debts.
- By using the bankruptcy exemptions, many debtors can go through the bankruptcy process without losing any of their property.
- While a bankruptcy filing will remain on your record for 7-10 years, because many debts can be discharged in bankruptcy, many debtors begin improving their credit rating after filing for bankruptcy.
Should You Contact a Bankruptcy Lawyer?
Whether bankruptcy is the right solution to your financial problems will depend on your situation, the type of debts you have, and how much property you need to protect. If you are contemplating bankruptcy, you should consider discussing your options with an experienced bankruptcy attorney. A bankruptcy attorney can help you decide whether or not to file for bankruptcy. If you decide to file, an attorney can help ensure that your property is protected, all of your dischargeable debts are discharged, and your creditors do not violate your rights, so that when you complete your bankruptcy, you will be on the right road to financial recovery. Information sourced from http://www.legalmatch.com/law-library/article/bankruptcy-advantages-and-disadvantages.html