Filing bankruptcy is one of the hardest decisions a person will ever have to make but more and more financially-strapped people are choosing to do so in these economic troubling times. Bankruptcy can bring some peace of mind to the financially-strapped family making more money available for the essentials for life and health. Bankruptcy is not a cure all nor does it come without its price. A person or couple considering bankruptcy must weigh all the options and effects of declaring bankruptcy and the effect it will have on the whole family.
Pros of filing for bankruptcy
- Bankruptcy allows for a fresh start.
- Cancels most unsecured debts.
- Bankruptcy can even shield you from non-dischargeable debts by giving you some time to repay those non-dischargeable debts.
- Might be able to eliminate tax liabilities older than three years.
- Stops harassing phone calls from creditors, threatening letters and lawsuits.
- Allows you to keep your car if you remain current on the payment.
- Allows you to keep your home if you remain current on the payments.
- Allows you to exit foreclosure and make monthly payments on the past-due amounts.
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In one respect, bankruptcy may improve your credit records. Because Chapter 7 provides for a discharge of debts no more than once every eight years, lenders know that a credit applicant who has just emerged from Chapter 7 cannot soon repeat the process.
Cons of filing for bankruptcy
- Stays on your credit report for 10 years and severely affects your credit rating.
- May require you to wait at least two years before you are eligible to buy a home.
- Some debt such as student loans, taxes, or family support cannot be discharged.
- Requires you to give up your credit cards.
- Carries a stigma that can be embarrassing.
- May cause you to lose some of your possessions if they are not exempt or have to surrender some nonessential or luxury possessions.