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The Pros & Cons of Filing for Personal Bankruptcy



If you are thinking about filing for bankruptcy, you should consider first the pros and cons of bankruptcy. Sure, the process does clear many of your debts, but it is not without its consequences.

Filing Bankruptcy: The Pros

The most obvious advantage of filing for bankruptcy is that it can discharge many of your debts. Discharge means the debts are forgiven and you are no longer responsible for them.

If you have been unable to pay your bills, you may be able to have these debts legally waived. Otherwise, you can file for Chapter 13, which allows you to reorganize your debts and consolidate them into a single monthly payment. This can make repayment much more affordable and manageable.

In addition, once you file for bankruptcy, the court will issue an automatic stay. An automatic stay means that creditors, the people and entities to whom you owe money, will be barred from making collection attempts on your debts. This will immediately put a stop to stressful phone calls or letters you may have been receiving from collection agencies.

Also, contrary to popular belief, you do not lose all your property when filing for bankruptcy. Under both federal and state laws, there exist what are known as bankruptcy exemptions. Bankruptcy exemptions are assets that bankruptcy trustees may not seize during Chapter 7 bankruptcy filings. This means that if you file for Chapter 7, you may be able to keep such items as your house, clothing, jewelry, and a variety of other personal belongings.

Finally, if you are worried that you may be fired from your job for filing bankruptcy, don't be. Under bankruptcy laws, you cannot be discriminated against by your employer for filing for bankruptcy.

Filing Bankruptcy: The Cons

The first downside to filing for bankruptcy is that despite helping you out of debt, it will not eliminate all your debts. The following are some of the debts that will remain after filing for bankruptcy:

In addition, although you do get to keep your exempt property when filing for Chapter 7, you do lose your non-exempt property. Depending on your financial circumstances, this could include your house, cars, cash, stocks, and bonds.

Filing for bankruptcy also leaves a stain on your credit history for 10 years. It may be significantly more difficult to secure a loan in the future. Even if you do secure a loan or a credit card, you will more than likely have a significantly higher interest rate attached to it.

Finally, filing bankruptcy is not cheap. With filing fees, bankruptcy trustees fees, credit counseling fees, and attorney fees, the cost of bankruptcy can really add up.

If you have further questions about the pros and cons of filing bankruptcy, you should contact a knowledgeable bankruptcy attorney and set up a consultation.