Making the decision to declare bankruptcy can be one of the most difficult times in your life. It can affect your relationships, your future credit, and the way that you see yourself. Though bankruptcy is also known to help your current financial state and prevent you from losing important assets such as your home and vehicle. Below are some of the most prevalent pros and cons of declaring bankruptcy.
List of Pros of Bankruptcy
1. Stops Creditor Collection
The most annoying part of being in debt is dealing with all of the calls from collectors that come into your home on a regular basis. From phone calls to threatening letters, it can be an emotionally difficult time. When you make the decision to declare bankruptcy it will immediately stop the collection process by creditors including garnishments, foreclosures, and repossessions. In the event that you’re using a lawyer, they will also prevent you from being questioned by creditors.
2. Exempting Personal Assets
Depending on the state that you live in, you might find that there are a variety of items that are exempt when you’re declaring bankruptcy. This means that you won’t lose them as a result of making this financial choice, including your car, home, and other essentials.
3. Building Financial Security
The faster that you declare bankruptcy, the faster you can start to rebuild your credit and be in a better financial situation. It gives you a clean slate where you can start form 0 and work your way up again; therefore you’ll want to start as soon as possible.
List of Cons of Bankruptcy
1. Damage to Credit Reports
Your credit report is one of the most important things that you have as an adult and when you make the decision to declare bankruptcy, it stays on your credit report for a long period of time. Most people will have their bankruptcy on their credit report for 10+ years, which makes it incredibly difficult to get a loan or insurance.
2. Some Debts can’t be Discharged
When you start looking over the finances that you can have discharged, you’ll notice that there are some debts that you won’t be able to get rid of unless you pay them off on your own, such as student loans and back taxes (within the past 3 years). It is important that you review the debts that can’t be discharged before deciding whether filing bankruptcy is right for you or not.