In this article, let’s take a closer look at the pros and cons of bankruptcy and how it should affect your decision on whether to seek bankruptcy or not.

The Pros of Bankruptcy

When bankruptcy is filed for the right reasons, it can have advantages or benefits to an individual.

First, it releases you from the pressure and stress of having creditors constantly obliging you to pay.
Some creditors are known to harass borrowers and such harassment can rob you of your privacy and peace. Once you have filed for bankruptcy, all creditors are prohibited from trying to contact you in any way or pursue any kind of debt collection practice. This will certainly give you peace of mind and relief.

If you do get approved for a Chapter 7 bankruptcy, you will be set free from all debts you have with your creditors. This means, you can have a fresh start again and live a life free from debts.

In case you do not qualify for Chapter 7, a Chapter 13 bankruptcy would put you under a bankruptcy repayment plan where you will be required to submit a certain percentage from your monthly wage as payment for your debts.

Even if a Chapter 13 doesn’t completely exempt you from your debts, going through a bankruptcy repayment plan can still be a great help in managing your debts.
The Cons of Bankruptcy
Are there disadvantages to filing for bankruptcy? What consequences will you be facing if you choose to file for bankruptcy?

Primarily, a bankruptcy record is a derogatory mark that will remain on your credit report for seven years. Imagine how potential employers, landlords, insurers and future creditors would react if they see that you have just been through bankruptcy. Although your credit rating and credit status can be improved over time, the road to recovery is a slow process.

Going through a bankruptcy procedure also requires money and a great deal of your time. Today, you need to hire a bankruptcy lawyer to prepare your bankruptcy documents for you. Although there are bankruptcy lawyers who ask for a small fee for their services, usually your best bet would be to hire someone who asks for a considerable service charge.

After filing for bankruptcy, are you guaranteed to get an approval? Under the new bankruptcy law, one needs to pass the “Income Means Calculation Test” to determine whether he will be eligible to file for a Chapter 7 Bankruptcy or Chapter 13 Bankruptcy. In case you do not qualify for a Chapter 7, take note that a Chapter 13 will still put you under a five-year debt repayment program.

Nevertheless, a Chapter 13 repayment plan would be more affordable for your budget.

Should Your File for Bankruptcy?

Your credit counseling agency should be able to help you decide whether filing for bankruptcy is really for you. If your credit counselor suggests that you take on the alternative steps instead, then be cooperative. Be prepared to take on the challenge of getting out of debt without resorting to bankruptcy.

About the Author

Liz Roberts is a freelance writer and loan consultant. The website http://www.badcreditresources.com offers resources that specialize in providing bad credit loans and bad credit cards to people with bad credit.

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