List of Pros and Cons of Bankruptcy
Declaring bankruptcy is not a choice that should be made lightly. Before doing so, a person should take the time to thoroughly investigate the advantages and disadvantages of their decision. Rushing into a choice of this magnitude is not a recommended course of action. There are short term effects to bankruptcy and there are long term effects. It is important to weigh them both equally. Read on for a more thorough investigation of bankruptcy’s pros and cons.
The Pros of Bankruptcy
1. No More Creditor Calls
One of the worst parts about being in debt is being forced to deal with the harassing phone calls from your creditors and the collection agencies assigned to you. These calls can cause a person to be extremely stressed out and even a debtor’s family may end up receiving calls on their behalf.
When you file for bankruptcy, the harassing calls stop completely. No longer are you forced to deal with ruthless collection agencies. Those who file their bankruptcy with a proper attorney get to use them as a buffer. They will now be responsible for handling all of your calls, allowing you to rest easy.
2. Essentials Are Exempt
Except for extreme cases, when people purchase mansions and luxury vehicles that they cannot afford, you are allowed to maintain all of your essentials so that you can keep your normal lifestyle. For those who rely on their vehicle to get to and from work and/or school each day, this is a huge relief.
Bankruptcy filers are also allowed to keep their homes, so that they will not be forced to live on the streets. Any other essentials that you need for daily living can be argued for during the bankruptcy proceedings.
3. Decrease Your Reliance On Credit Cards
Typically, those who struggle with bankruptcy do so because they allow themselves to get strung out on credit card debt. By cutting the purse strings and learning how to live with the cash you have on hand, losing all of your credit cards can be a blessing in disguise and a chance for you to change your ways for good.
Credit cards have the ability to get you into serious messes and once that snowball begins rolling down the hill, a person may feel completely and utterly powerless. Getting rid of credit cards allows a person to put the power back into their own hands. Learning to live without the use of credit cards may just end up being the best decision you’ve ever made.
4. The Sooner You File, The Better
If you have sat around procrastinating, allowing your financial situation to fall into a state of disrepair, waiting around will not help you. The faster you file, the faster you can make the necessary changes and move on with your life. Rebuilding your credit and your day to day existence is a very long process, so getting started as soon as possible bodes well for your future credit score.
The Cons of Bankruptcy
1. Loss Of Credit Cards
Once you file for bankruptcy, that is the end of you being allowed to use credit card. All of the ones that you currently have in your possession are taken away from you and you will not be allowed to apply for any more. The only way to keep your cards is to have all of them fully paid off before you file for bankruptcy.
However, since most people who file do not have liquid assets on hand, this is a tall task. Any luxury items that you used credit cards to purchase may also be taken away from you, especially if you have not finished paying it off.
2. No Mortgage
Buying a house after you file for bankruptcy is essentially impossible, unless you have a cosigner who is extremely open minded and not afraid to have their wages garnished if you default on your payments.
While you may be able to receive a mortgage roughly 10 years after you’ve initially filed for bankruptcy, be forewarned, this is a lengthy process and there is no guarantee that a lender will look favorably upon your situation.
3. All Debts Are Not Forgiven
Bankruptcy does not wipe a person’s slate clean automatically. There are certain debts that cannot be taken care of by declaring bankruptcy. For example, any student loans that you have failed to pay off will remain in default. Any taxes that you did not take care over the past three years will still follow you.
Before filing for bankruptcy, be sure to do your homework, so that you do not end filing to get rid of debts that are still going to be a part of your life.
4. You Will Have To Explain Yourself
Declaring bankruptcy is not as easy as filling out some paperwork, then watching someone wave a magic wand, clearing you of all your financial responsibilities. You are going to have to pore over your financial records with a judge and being forced to explain where all of your money went can be embarrassing.
You are going to have to open your books and allow strangers into your personal affairs. While the lure of living debt free typically causes people to forget this fact, a more private person may not be okay with this idea. A trustee also has to go over your financial records before granting a bankruptcy.