The very word ‘bankruptcy’ creates many different feelings for people – from stress and anxiety to relief. It is no secret that times have been tough in our society in the last decade or so. From the economic crisis of 2008 to today, many are still struggling to make ends meet. While the economy is bouncing back and we are seeing more and more jobs being created, for many, it’s too late. So, what do you do when you are in over your head debt-wise, can no longer make your mortgage payment, and can’t seem to stay on top of your bills? In some cases, filing for bankruptcy is a viable and very real option. It is important to keep in mind that the decision to file bankruptcy is not one that should be made lightly. This is a very serious, life-changing decision that needs to be carefully considered.
There are several different types of bankruptcy (Chapter 7 and Chapter 13, namely) that are intended for specific scenarios. Furthermore, it should be noted that declaring bankruptcy will affect your future credit and may make it more difficult for you to buy a car, get another mortgage, or even get a credit card. Make sure you have gone over all of your options and discussed your particular case with a financial advisor before proceeding with the bankruptcy process. With that in mind, let’s go over the pros and cons of filing for bankruptcy.
Pros of Filing for Bankruptcy
Let’s start with the good news. As you likely know, the most obvious advantage of filing for bankruptcy is that it will free you of many – if not all – of your debts. Once your bankruptcy claim has been accepted, your debts will be discharged, which means they are forgiven and you are no longer responsible for them. Here is a look at a handful of additional pros to declaring bankruptcy:
- All collection actions by creditors will be stopped (this includes foreclosures, repossessions, and any garnishments)
- Your home, car, and other essential possessions will likely be exempt, meaning you can keep them (Be sure and check with an attorney on this, as every state is different)
- Once you declare bankruptcy you can begin rebuilding your credit
- You cannot be fired for your job for filing for bankruptcy (this is a common misconception, but under bankruptcy law, you cannot be discriminated against for filing for bankruptcy)
Cons of Filing for Bankruptcy
Now the hard part – the negative aspects of filing for bankruptcy. Again, bankruptcy is the right choice for many, but it is absolutely imperative that all factors are taken into considerations. Here is a look at the cons of declaring bankruptcy:
- You will lose all your credit cards
- You will not be able to get a mortgage anytime soon after filing for bankruptcy (You should be able to within about 5 years)
- A bankruptcy will stay on your credit report for 10 years, which can make it difficult to establish credit, buy a home or car, get life insurance, and sometimes get a job
- Not all debts may be discharged (Student loans and paying back taxes are not forgiven with a bankruptcy claim)
- When you file bankruptcy, your name may appear in court records and the newspaper
We hope you now have a better understand of the advantages and disadvantages of filing bankruptcy. To learn more about the various types of bankruptcy or to discuss your particular case with a knowledgeable Oklahoma bankruptcy attorney, please contact Atkins & Markoff today.