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The Pros and Cons of Filing a Bankruptcy
Declaring bankruptcy can feel too scary even to contemplate.
But bankruptcy is also a powerful tool and can bring considerable relief for those buried by unsustainable levels of debt.
The following is a list of advantages and disadvantages to consider before declaring bankruptcy.
Advantages
- Phone calls from creditors, collection letters, repossessions, and lawsuits will stop as soon as the case is filed.
- Most unsecured debt is eliminated, ending ongoing missed debt payments, defaults and lawsuits that can drag down your credit score.
- Bankruptcy provides you with a “fresh start”, allowing you to meet your financial responsibilities moving forward.
- Bankruptcy improves your debt-to-income ratio, allowing you to rebuild your credit.
- Exemption laws allow most, if not all, of the things you own to be exempted from the scope of the bankruptcy.
- You can retain your home or your vehicle if you remain current with payments.
- Bankruptcy avoids foreclosure by providing you time to pay back mortgage arrears or to sell your home.
- Bankruptcy may eliminate tax debt older than 3 years under certain circumstances.
- Bankruptcy does not eliminate student loan debt, but will prevent lenders from aggressive collection action.
- Judges, attorneys, and trustees are very respectful and have seen and heard far worse bankruptcy stories than yours (trust us).
Disadvantages
- If you have a healthy credit score, filing for bankruptcy will lower it until you rebuild it.
- The fact that you filed a bankruptcy will appear on your credit report for 7 to 10 years from the filing date.
- You will lose your current credit cards.
- Student loan debt is not eliminated in bankruptcy.
- Most tax debt is not dischargeable.
- You have to wait a certain number of years between bankruptcy filings.
- You may have to wait 4 years or take extra steps to get a mortgage.
- You can lose luxury possessions.
- It can initially feel defeating.
- It can feel uncomfortable to explain to a judge, trustee, and attorney how you got into your financial situation.
The Consumer Bankruptcy Relief Center services these areas: Amesbury, Andover, Arlington, Bedford, Beverly, Billerica, Boston, Braintree, Brockton, Brookline, Burlington, Byfield, Cambridge, Cape Cod, Chelsea, Chelmsford, Chestnut Hill, Concord, Danvers, Dedham, Dracut, East Boston, Everett, Fall River, Fitchburg, Foxboro, Framingham, Georgetown, Groveland, Gloucester, Hanover, Haverhill, Ipswich, Lawrence, Leominster, Lexington, Lowell, Lynn, Lynnfield, Manchester, Marblehead, Marshfield, Malden, Medford, Melrose, Methuen, Natick, Needham, New Bedford, Newburyport, Newton, North Andover, Norwell, Norwood, Peabody, Plymouth, Quincy, Randolph, Revere, Rockland, Rowley, Salem, Saugus, Somerville, South Boston, Springfield, Stoneham, Swampscott, Tewksbury, Topsfield, Taunton, Wakefield, Waltham, Watertown, Wenham, Weymouth, Winchester, Winthrop, Woburn, Worcester, North Shore, South Shore, Barnstable County, Berkshire County, Bristol County, Dukes County, Essex County, Franklin County, Hampden County, Middlesex County, Plymouth County, Worcester County and Norfolk County.
Disclaimer: We are a debt relief agency. We help people file bankruptcy under the U.S. Bankruptcy Code. This website is designed for general information only. The information presented on this site is not legal advice, and no attorney-client relationship is formed by the use of this site. You should not act upon this information without seeking professional counsel.