Recent reports have suggested that as many as 20 million Americans could benefit from filing for bankruptcy. But despite this, only about 500,000 people do it every year.
Are you thinking about filing for bankruptcy right now? Before you do it, you should consider the pros and cons of filing bankruptcy to see if it’s really right for you.
Let’s take a closer look at some of these pros and cons to find out if bankruptcy would be the best option for you based on your current financial situation.
Pro: Gets Creditors Off Your Case Almost Immediately
Do you have creditors calling you almost every day and sending you letters in an effort to collect on a debt that you owe? This can take a huge toll on you and make it difficult for you to go about your normal business.
Once you find out how to file bankruptcy, this won’t be an issue anymore. You’ll notice that the collection calls will stop almost right away once you’ve filed for bankruptcy. This is because most, if not all, of your debts will be discharged once you file.
This can give you some sense of hope for the future. It can also eliminate a lot of the stress you feel at the moment as a result of your financial issues.
Con: Doesn’t Cover Every Kind of Debt
Some people are under the impression that bankruptcy will wipe away all of their debt. But there are certain types of debt that will stick around even after you file for bankruptcy.
Some of the debt that will linger includes:
- Debts owed to the IRS
- Student loan debts
- Mortgage-related debts
A good bankruptcy lawyer can break down which types of debt will stick around after you file bankruptcy and advise you on whether or not bankruptcy would make sense for you.
Pro: Allows You to Rebuild Your Credit Over Time
If you’re able to discharge some of the debts you owe, it’ll put you in a better position to rebuild your credit over the years. You can put yourself back on the right track by eliminating debts that will be impossible to conquer.
Although bankruptcy will knock your credit score way down, there’s a good chance that your debt has already done a number on it. By knocking it down a little further and getting rid of debt at the same time, you can start the rebuilding process.
Con: Makes It Difficult to Get Loans in the Short Term
Bankruptcy will stay on your credit report for anywhere from 7 to 10 years. That means that, for the next decade or so, it’s going to be very hard to get a mortgage, a car loan, or even a credit card.
Of all the pros and cons of filing bankruptcy, this is probably the one you should spend the most time thinking about. You need to be mentally prepared to live without credit for up to a decade once your bankruptcy goes through.
Weigh the Pros and Cons of Filing Bankruptcy Before Making a Decision
Does bankruptcy sound like it might be a good move for you?
As long as you’ve weighed the pros and cons of filing bankruptcy, you should pursue it further. Talk to a lawyer about the process of filing for bankruptcy and all that it entails.
Read our blog for tips on finding the right lawyer to help you along the way with bankruptcy.