Before you take the plunge, it is important to consider the advantages and disadvantages of bankruptcy to know if it is the right solution for your financial problems. If you have recently experienced a substantial decrease of income and are finding it difficult to make ends meet, then filing for bankruptcy could be a reasonable option for you.
For personal bankruptcy, the choices are Chapter 7 or Chapter 13. Chapter 7 involves liquidating non-exempt assets to pay your creditors while Chapter 13 involves a debt repayment plan. You may choose the type of bankruptcy depending on your financial status and goals.
Reasons to File
Filing for bankruptcy is a major decision because it will have an impact on your credit report for many years. Hence, the first thing you should do is to talk to a bankruptcy lawyer who can assess your situation and discuss your options.
Filing for bankruptcy is a viable solution when you are constantly worrying about being able to meet your obligations to your creditors. In addition, you should consider using the bankruptcy process to get debt relief if you have no income, you are facing an expensive lawsuit, or you are dealing with home foreclosure. In these terrible situations, seeking protection for yourself and your assets against creditors can help you sort out your finances and cease all debt collection efforts.
The main advantage of bankruptcy is that it can wipe out your debts. A bankruptcy discharge can eliminate your legal responsibility to pay for them.
If you have been struggling to pay your bills, you may have the ability to get rid of these debts in Chapter 7 bankruptcy. If not, you can file for Chapter 13 bankruptcy, which is an affordable debt repayment plan based on your income. This can remove the burden of having too many debts to pay.
Moreover, an automatic stay takes effect once you file for bankruptcy. The automatic stay bars everyone you owe from attempting to collect any payment from you. This is going to automatically put a halt to the collection phone calls or letters that may have been distressing you.
In addition, you can protect you exempt assets from creditors. The state and federal laws provide bankruptcy exemptions that allow you to keep essential possessions in a Chapter 7 bankruptcy filing.
Lastly, the bankruptcy laws protect you from being terminated from your job because you filed for bankruptcy.
Stating the benefits of seeking bankruptcy relief is just one side of the story. But you need to know both the advantages and disadvantages of bankruptcy.
One of the major concerns of people who are planning to file for bankruptcy is the negative effect on their credit ratings, it can pull down your credit scores. However, you can start rebuilding your credit after you receive a debt discharge.
Another drawback of declaring bankruptcy is that your debts will become public knowledge.
You may also lose some of your assets in Chapter 7 bankruptcy, which involves a liquidation process. A bankruptcy trustee will sold your nonexempt and the proceeds will be distributed to your creditors.
Fortunately, you can exempt your car and home equities, so that you will truly have a financial fresh start. With the help of a bankruptcy attorney, you can find out what exemptions will be the most advantageous for your situation. The attorney can also discuss with you the advantages and disadvantages of bankruptcy in your own situation.
Author Bio: Jarmela Avelino
This article is written by Jarmela. She writes bankruptcy blog posts to make it easier for people to understand how filing for bankruptcy can provide them with debt relief and ultimately a fresh start. She has been a writer and marketer for a legal advertising team of a bankruptcy attorney since 2011. When she’s not writing, she is reading bankruptcy news articles to keep herself abreast of the new applications of the U.S. bankruptcy law.