Is Filing for Bankruptcy the Right Solution for You?

Worried couple doing their accounts in the living room — Overland Park, KS — Wiesner & Frackowiak LC
What would you do if you found yourself in a tricky financial situation that prevents you from paying your debts? While many view bankruptcy negatively, it is a perfectly fine form of debt relief and might be your only alternative. However, filing for bankruptcy can come at a cost. Therefore, you will need to decide whether or not bankruptcy is the right decision for your specific situation.

Below is a guide explaining the pros and cons of filing for bankruptcy.

Pros of Bankruptcy

Discover some of the perks of filing for bankruptcy.

Bankruptcy Helps You Acquire an Automatic Stay Against Creditors

Filing for bankruptcy will enable you to obtain relief from creditors. An automatic stay will bar creditors from taking actions such as debt collection. In addition, it prevents creditors from contacting you or opening charges against you. That way, you will not have to deal with letters of warning as a debtor.

Bankruptcy Prevents You From Losing Your Assets and Property

Once you file for bankruptcy, you might be able to keep some of your properties, such as a car or a home, through exemptions. However, due to the variations in state laws, the assets eligible for exemptions vary significantly. Therefore, consult with your lawyer to know the assets that qualify for exemptions.

Bankruptcy Leads to the Cancellation of Dischargeable Debts

Filing for bankruptcy can lead to the cancellation of your dischargeable debts. This means that you will not need to repay debts categorized as dischargeable, such as personal loans and credit card debts. A debt repayment relief could be all you need to get your finances right.

Bankruptcy Eventually Improves Your Credit Score Ratings

While you initially take a hit to your credit with bankruptcy, you also obtain a clean, fresh start to rebuild your credit score. After filing for bankruptcy, the debt-to-income ratio, a factor that determines your creditworthiness, improves. However, bankruptcy attorneys come in handy in helping you discern the feasibility of filing for bankruptcy to improve credit scores.

Cons of Bankruptcy

Below are some of the downsides of filing for bankruptcy.

Bankruptcy Filings Are Costly

The bankruptcy filing process will require you to at least have $300 for filing fees. Therefore, if you want to cancel a $2,500 credit card debt, bankruptcy is not a cost-effective alternative. You will also need to part with attorney fees. However, many reputable attorneys will often offer discounted services if you are in a dire financial situation.

Non-Dischargeable Debts Are Not Nullified

Filing for bankruptcy does not mean that you will forfeit all your debts, as not all of them are dischargeable. While bankruptcy can significantly minimize your debt to the Internal Revenue Service (IRS) and fully exempt you from paying a dischargeable debt, you will still have to pay non-dischargeable debts, such as student loans. As such, know if the debts prompting you to file for bankruptcy are dischargeable.

A Chance of Mortgage or Car Loan Is Lower

Filing for bankruptcy will often negatively impact your credit score for 7 to 10 years. Simply put, it often prevents you from acquiring credit from a car loan, mortgage, or credit card in the future.

Filing for bankruptcy can spark different emotions among consumers. Despite the negativity associated with bankruptcy, it might be your sole option.

However, before making the final decision, consult bankruptcy attorneys for guidance. Contact Wiesner & Frackowiak, LC, today, and we will be more than delighted to offer our professional expertise and guidance. We look forward to seeing you and helping you decide whether bankruptcy is the right path for you. Please let us know what we can do for you.

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