Pros and Cons of Bankruptcy

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Filing bankruptcy is one of the hardest decisions a person will ever have to make but more and more financially strapped people are choosing to do so in these economic troubling times. The rising cost of food, fuel, and living coupled with the declining job market and the dismal run on Wall Street and collapse of solid financial institutions has made this one of the bleakest financial eras in modern history. Not since the great depression of the 20’s and 30’s have so many people been homeless, out of work, and facing a financial future full of doubt and despair.

An individual or couple should weigh all the pros and cons before the file for bankruptcy. Even though the prospect of bankruptcy is distressing to most families and individuals, the consequences of not filing are even greater for many. A person that faces these decisions must consider the welfare of his/her family over the personal feelings of inadequacy or failure. Bankruptcy can bring some peace of mind to the financially strapped family making more money available for the essentials for life and health. Bankruptcy is not a cure all nor does it come without its price. A person or couple considering bankruptcy must weigh all the options and effects of declaring bankruptcy and the effect it will have on the whole family.

The pros and cons of bankruptcy can include the effect it will on the ability to get loans or it may affect the relationship between spouses and family but it can also afford much needed financial breathing room to make a fresh start and it may even save the family’s home.

The pros and cons of bankruptcy include:

Pros

  • Relief from harassing creditors – creditors must cease all collection actions
  • Foreclosures and repossessions are frozen – at the time of filing any attempts to foreclose on a home or reposes an automobile must be discontinued
  • The bankruptcy attorney deals with all creditors – once a bankruptcy has been filled the bankruptcy attorney handles all transactions for the filer
  • Bankruptcy allows for a fresh start – bankruptcy offers the filler a chance to rebuild their financial life
  • Bankruptcy filing will prevent lawsuits – once a petition for bankruptcy has been filed, the filer cannot be sued for outstanding bad debt
  • Bankruptcy can even shield you from non-dischargeable debt – some debt is non-dischargeable but when you claim bankruptcy, this can buy you some time to repay those non-dischargeable debts
  • Most states will allow a filer to keep their primary residence – in many states, a filer is allowed to exempt their primary place of residence, automobile and other fundamentals elements necessary to make a fresh start

Cons

  • It may be hard to qualify for a mortgage for a certain time after you file personal bankruptcy
  • A person that files for bankruptcy will lose any credit cards not paid off before filing
  • A filer may have to make some sacrifices in order to qualify for bankruptcy such surrender some nonessential or luxury possessions
  • A bankruptcy filing will remain on the filer’s credit report for 10 years
  • A bankruptcy can affect the ability to get and price of insurance, make it hard to obtain credit, or even get a job
  • Some debt such as student loans, taxes, or family support cannot be discharged
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