Declaring bankruptcy is a serious matter and should be approached thoughtfully and carefully. It is imperative that you research and understand all aspects of the bankruptcy process, including possible outcomes. This article provides a very brief outline of bankruptcy and its pros and cons.
If you are having trouble making ends meet, you might be considering bankruptcy as an option to getting out of the financial tailspin in which you find yourself. This option may be for you; however, prior to jumping head first into this process, you should perform some research to make sure you really understand what bankruptcy is and how it will affect you.
When you file a legal proceeding to have your debt discharged (Chapter 7) or to reorganize your finances (Chapter 13), you have filed a bankruptcy proceeding. A bankruptcy filing is normally done voluntarily and because the debtor is having trouble paying his creditors.
The primary reason people consider bankruptcy is so they can begin anew. The completion of the bankruptcy will mean that the debtor can take a step back from the financial chaos that was consuming his life and start over. Thankfully, this means there will be no more threatening letters and phone calls. And, hopefully, the bankruptcy will leave the debtor in a position whereby he will be able to live within his means.
We need to clear up some common and erroneous ideas related to bankruptcy. Some people believe that filing bankruptcy will cause you to lose your job. This should not be the case. Additionally, some people, probably the same people, believe that you will lose your social security benefits if you file bankruptcy. Again, this should not be the case. Lastly, there are those who believe that your credit report will be so damaged that it will never be the same again. It is true that your credit score will take an instantaneous hit by filing bankruptcy, however, with time and diligence, 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.
You may lose some of your assets, depending on the chapter of bankruptcy that you file. It should be noted though that some assets are exempt. When you meet with your bankruptcy attorney, you should discuss the different types of bankruptcy and the possible consequences.
Another thing to consider is the cost involved. When you file a case in the Bankruptcy court, you will be required to pay a filing fee. In addition to this, there are attorney’s fees which can run $2,000 or more. Therefore, if your total debt is only a few thousand dollars, it would behoove you to consider working with your creditors to arrange a payment plan rather than considering bankruptcy.
Professional counsel from an experienced bankruptcy attorney should be sought if your are thinking about bankruptcy. A seasoned bankruptcy expert can guide you through the process and give you an idea of the expected outcome.
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