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What are the pros and cons of filing for bankruptcy?

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asked Oct 3, 2015 in Finance by anonymous
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Filing bankruptcy can often become the only viable option for people and/or businesses. Yet, it is a monumental decision, which has to be made with care to ensure the outcome is as desired and does not lead to further concerns. Let's take a look at the pros and cons of filing for bankruptcy in this day and age.

 

Pros

 

Let's begin with the positives. Filing for bankrupcty is going to help protect the person and/or business from all creditors until further action is taken. This can be important for those who are repeatedly being hounded by creditors.

 

Another positive comes in the form of being able to protect personal assets from creditors such as one's home and/or cars. This can be vital for those who don't wish to give these up [1].

 

Cons

 

What about the cons? All access to credit cards and being able to take out loans is going to go out the window. You will not be able to gain access to these options until the bankruptcy has been dealt with from start to finish [2].

 

Another con would come in the form of one's name being now established in court records. If the person and/or business is significant enough, these items will also be published in the newspaper considering such information often leaks with relative ease.

 

These pros and cons have to be balanced and understood prior to making a decision one way or the other.

 

References

 

1) http://www.consumeraffairs.com/finance/bankruptcy_02.html

 

2) http://www.debtsteps.com/filing-bankruptcy.html

answered Oct 3, 2015 by kingusama92 (23,380 points)
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Determining whether or not to file for bankruptcy is not an easy decision. Here are some of the pros and cons of bankruptcy that you may want to consider (Please note: The following list applies to Chapter 7 bankruptcy. Chapter 13 bankruptcy may have slightly different advantages and disadvantages.)

 

Pros:

 

  • Filing for bankruptcy instantly puts a stop to all collection activities by your creditors. This includes wage garnishments, repossessions and foreclosures. All inquiries from creditors must go through your attorney. [1]
     
  • Typically, most states provide exemptions for your home, vehicle and other essential assets. This means that you most likely don't have to worry about winding up homeless or unable to get to your job if you decide to file.
     
  • Credit card debt and many other types of unsecured debt are completely erased when you file for bankruptcy. This can allow you to start over with your finances, making smarter decisions in the future.

 

Cons: 

 

  • Many types of debt are not erased by bankruptcy. This includes back taxes, student loans, alimony, child support and any money owned to government agencies. [2]
     
  • When you file for Chapter 7 bankruptcy, you will lose any property that is not covered by your state's exemptions. Depending on your personal financial situation, this may include cash, vehicles, your house or investments such as stocks and bonds. [2]
     
  • A bankruptcy can stay on your credit report for up to 10 years, making it difficult or impossible to qualify for credit in the foreseeable future. However, bear in mind that collection activities by creditors can also negatively impact your credit. Having a bankruptcy on your credit report may be no harder to explain than having countless negative marks from other creditors.
     
  • Filing for bankruptcy can be expensive. In most cases, it costs anywhere from $1,000 to $3,000 to file. Coming up with this much money when you are stuck in a dire financial situation can be extremely difficult.
     
  • Your name gets published in the newspaper, informing people in your local community that you filed for bankruptcy. This can be extremely embarrassing, depending on your standing in the community.

 

It is important to talk to a lawyer about whether or not filing for bankruptcy is right for you. They can help you evaluate your current financial situation to determine what your best course of action is. In some cases, they may suggest filing for Chapter 13 bankruptcy rather than Chapter 7, simply because it may allow you to keep non-exempt assets that would be lost under Chapter 7.

 

The following video takes a closer look at some of the advantages and disadvantages of filing for bankruptcy:

 

 

References:

1. http://www.consumeraffairs.com/finance/bankruptcy_02.html
2. http://www.attorneys.com/bankruptcy/the-pros-cons-of-filing-for-personal-bankruptcy/

answered Oct 9, 2015 by blueskies (57,070 points)

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