If you are considering bankruptcy, you should research all aspects of the process and the possible outcomes. This article is meant to be a very brief summary of the pros and cons of bankruptcy.
As people begin to experience anxiety over their inability to pay all of their bills because of the current economic climate, they begin to consider bankruptcy as an option. However, what is bankruptcy exactly?
Bankruptcy is a legal process whereby a person or company files bankruptcy in the Bankruptcy Court to obtain relief from their financial situation. This is normally done voluntarily and as a result of being unable to pay their creditors. Depending on which chapter of bankruptcy a person files, the person seeks either to have the debt discharged so he can begin fresh (Chapter 7) or the person seeks to reorganize, keeping his assets but arranging a payment plan to pay back his creditors (Chapter 13).
Essentially, people consider bankruptcy so they can start fresh. Once the bankruptcy is completed, the person will be able to start over with no harassing phone calls and knowing that he can live within his means.
There are some misconceptions regarding bankruptcy. To begin with, you should not lose your job nor your social security benefits because of a bankruptcy. Additionally, your credit score will most definitely suffer, but it can be repaired.
The major issue with declaring bankruptcy is that your credit score will be dramatically affected and will instantly plummet hundreds of points. Because of this, you will likely be denied for all credit products for several years, possibly up to ten years.
Depending on which chapter of bankruptcy you file, you may lose some of your assets. There are, however, some assets which are considered exempt. A bankruptcy attorney will discuss this with you when you meet with him.
Additionally, the cost involved needs to be considered. There is a filing fee for filing the case with the Bankruptcy Court as well as attorney's fees which can range from $1,000 to more than $2,000. Therefore, when the total debt is just a few thousand dollars, it may be best to just deal with the creditor than to file bankruptcy.
If you are considering bankruptcy, you should obtain professional advice from a bankruptcy attorney prior to moving forward. A bankruptcy attorney can explain the different chapters of bankruptcy and will be able to recommend which one you should file.
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