If you are considering applying for bankruptcy, you should think about the pros and cons of the whole process. Declaring bankruptcy could help you eliminate your debt, but will have a long-term impact on your finances, including your credit score. Here are the upsides and downsides of bankruptcy.
The bankruptcy process supports you with debt management. A court trustee will assist you in selling valuable items and setting up a plan to repay your debts. Exemptions can support you to keep your car, property, and business.
Exemptions are deductions prescribed by law to reduce or eliminate your obligation. They help you to stay financially independent without risking your personal assets. Some debtors can create repayment plans depending on their liquidity. Whichever method you choose, bankruptcy will give you peace of mind.
Once you apply for bankruptcy and the court waives the debt, you don’t have to pay anything. Debtors are no longer under financial pressure and constant stress. They can start planning for the future without debt hanging over their heads.
Filing for bankruptcy keeps you protected from collection agencies by activating an automatic stay. This is a legal injunction which prohibits any kind of collection. It helps the court to focus on the bankruptcy process and to resolve debt disputes.
When you declare bankruptcy, you can finally get rid of your credit cards. Once you remove them, you will learn to live within your available budget. Over time, you will acquire healthier spending habits and money management skills. Furthermore, you will control your spending behavior which will in turn prevent a future crisis.
After filing for bankruptcy, the process will remain in your records for the following 7-10 years. However, you will start to improve your credit rating over the years which will allow you to have a fresh start.
Some people believe that bankruptcy takes all their belongings. In some situations, there is a risk that you will have to sell some of your personal items for debt purposes. This usually happens in the liquidation process when the court trustee sell part of your land or additional property. In other cases, the court sells smaller things like clothes or accessories. However, before the whole process, you should be aware of the potential loss of property.
Declaring bankruptcy supports debtors with serious financial problems. However, the whole process is not free of charge. When you apply for bankruptcy, there are obligatory court costs including administrative and document costs. Some estimations say that on average, filing for bankruptcy costs up to $400. In addition, you will have to compensate attorney costs as well as similar legal aid services. If you are unable to finance the costs, you can apply for pro bono assistance or reduced-cost legal services.
Applying for bankruptcy will significantly influence your credit history. This is the indicator used by lenders to estimate how reliable you are as a debtor. As a result of bankruptcy, your score will decrease significantly.. The credit score level you are left with will depend on your debt amount and your score before the process. The consequences will stay with you in the future as you are likely to have limited access to loans, mortgages and credit cards. Debtors should follow their credit reports and enroll in some credit protection services. We recommend AnnualCreditReport.com, Experian, Identity Guard, MyFico and IdentityForce for checking your reports.
Once you complete the bankruptcy process, your name will stay on the public record. Anyone will be able to request information about your debt history, and you will face additional problems when looking for a job or house.
Declaring bankruptcy is related to mental and physical problems. Some studies reveal that financial debt is associated with depression, high stress and blood pressure. Filing for bankruptcy can intensify these symptoms and affect your health.
As you can see, bankruptcy is associated with serious problems and consequences. If you consider applying for bankruptcy, you should definitely consider the pros and cons of the process. It will help you not only to accept the problem, but also to manage it.