Should You File for Bankruptcy? Important Things to Consider
Posted on: 11 January 2022
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Are you in a bad financial situation right now, and think that bankruptcy may be your best option? If so, it will help to know some reasons why you should and should not file for bankruptcy
The Advantages of Bankruptcy
One of the reasons that people use bankruptcy is because they are seeking some immediate relief from their debts. They may have creditors coming after them for money that they owe, and need to recollect themselves financially to figure out what is going on. They may also be worried about losing their home and having it go into foreclosure.
A bankruptcy filing buys you some time with the automatic stay law, which prevents creditors from contacting you about your debts. It also prevents utilities from being shut off at your home as well. Even if the debt is not discharged, you can gain some extra time where you don't have to pay it off thanks to the automatic stay.
Bankruptcy can also stop wage garnishment from occurring. You can maintain your current level of income throughout the bankruptcy process, and potentially have those debts discharged that will eventually cause wage garnishment.
The Disadvantages of Bankruptcy
Be aware that bankruptcy is going to remain on your credit report for several years. Anytime you apply for a loan or a line of credit where your credit report is reviewed, that bankruptcy filing is going to show up and be a potential reason to be denied. While there will come a point where the bankruptcy filing disappears, it will be many years until that happens.
You should know that there are debts that you cannot discharge with a bankruptcy filing. Student loans are one of those debts that will not go away, and debt settlement is often the better way to go to get rid of a portion of your student loan debts. You also cannot get rid of back taxes, child support payments, and spousal support payments.
If you have any loans that were acquired with a co-signer, know that the co-signer is going to be affected by your bankruptcy as well. The impact of defaulting on a mortgage or car loan can impact them in a negative way that can be difficult to recover from.
Not sure if bankruptcy is the best option for you? Meet with a bankruptcy lawyer for a consultation. They can review your financial situation and let you know if bankruptcy is the right path to go down.