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The Pros and Cons of Bankruptcy
July 22nd, 2007 by Shenron
The decision whether to file for bankruptcy can be difficult and distressing. While you will be relieved of the stress of dealing with so many creditors and you will be given a fresh start, your credit file will be marred by the bankruptcy record. So if you’re thinking about declaring bankruptcy, take time to reflect and use your good judgment when deciding. Meanwhile, here are the list of advantages and disadvantages of bankruptcy to aid you in making the correct choice:
ADVANTAGES
- You will be able to start anew financially as you will be discharged from most of your unsecured debts (especially when you filed a Chapter 7 bankruptcy). Secured debts have personal properties attached to the debt, such that when you’re not able to pay, the creditor may repossess the property. Common secured debts are home mortgage and car loan. Most consumer debts are unsecured and can be cancelled.
- You will be freed from the stress of dealing with so many creditors – some of them may harass you if your payment is long overdue. Once bankruptcy is filed, there is a law called automatic stay which prohibits creditors from filing lawsuits, repossessing your property, and foreclosing your home. Furthermore, if you have filed with an attorney, all inquiries from creditors will be channeled to him.
- You will be able to keep most of the essentials such as your home and car, so you will have a roof over your head and you will still be able to get around.
- You can keep your job as filing of bankruptcy cannot be a ground for dismissal.
DISADVANTAGES
- A record of being bankrupt is a blemish on your credit file – such a record stays on the files for 10 years. As a consequence, mortgages will be very difficult to obtain, so are bank accounts and credit cards. The loss of credit cards may be a good thing though because they are a common cause of being buried in debts. If you do obtain a credit, it may still reflect the record of bankruptcy as it will most probably carry a higher rate than before you filed for bankruptcy.
- Not all debts can be written off. Domestic (child) support obligations, debts acquired through fraud, fines, and secured debts still need to be paid even after filing of bankruptcy. The rights of secured creditors are not affected by bankruptcy.
- If you own a business, it will most probably be sold off and the employees dismissed.
- The names of those who become bankrupt are in the court records and in the newspapers.
- Bankruptcy is an admission of failure and can be a source of disgrace.
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