Most people consider bankruptcy as a very last resort, which is what it is meant to be. You should carefully and thoughtfully approach bankruptcy with a complete understanding of all the nuances associated with the bankruptcy process. It is important that you research and understand all possible outcomes to bankruptcy. The remainder of this article is devoted to a very brief summary of the pros and cons of bankruptcy.
As it becomes increasingly difficult to make ends meet, many people begin to think that bankruptcy may be a good idea. Before jumping into a decision like this, though, you should research what bankruptcy really is.
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).
The main advantage to filing bankruptcy is that the person will be able to start fresh. The bankruptcy, once completed, will allow the debtor to take a breath and start anew. There will be no more harassing phone calls and letters and the debtor, hopefully, at this point, 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.
It is important to note that as soon as your credit score plunges downward, you will find it extremely difficult to obtain any type of credit products. It is also important to understand that a bankruptcy can remain on your credit report for up to ten years.
Something else to keep in mind is that, depending on the bankruptcy chapter filed, some of the debtor’s assets may be lost in order to pay creditors. However, some assets are exempt, thankfully. You should discuss the different chapters of bankruptcy and the possible outcomes when you meet with a bankruptcy attorney.
You should also consider the cost involved. To begin with, there is a filing fee which must be paid when the case is filed with the Bankruptcy Court. Also, there are attorney’s fees. These can range anywhere from $1,000 to $2,000, or more. So, it makes sense that if your total debt is just a few thousand dollars, you might want to negotiate a payment plan with your creditors rather than file bankruptcy.
In conclusion, it would be wise to seek professional counsel from a seasoned bankruptcy attorney if you are thinking about filing bankruptcy. An experienced bankruptcy professional will be able to explain the process to you and guide you to the best outcome for your situation.
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