Last Updated on February 21, 2021 by James Gentile
Are you struggling to keep up with your bills? Are you considering filing for bankruptcy? If so, you are not alone. According to the American Bankruptcy Institute, more than 770,000 people filed for bankruptcy in 2016. Filing for bankruptcy can be a viable solution for many families. Before you make any final decision, however, it is important to understand the pros and cons of filing for bankruptcy.
What Is a Bankruptcy?
Bankruptcy is a legal process that enables individuals to deal with their insurmountable debt, including credit card debt and medical bills. The common individual bankruptcy options are Chapter 7 and Chapter 13.
- Chapter 7: This type of bankruptcy “discharges” or forgives most, if not all, of your outstanding debt.
- Chapter 13: This type of bankruptcy is similar to reorganizing your debts. You are still liable to repay your debts over a three- or five-year time frame, but you oftentimes can keep your assets, such as a car or house.
Advantages of Filing for Bankruptcy
There are many advantages of filing for bankruptcy, including:
- Forgiveness or restructuring of outstanding debt
- Stopping harassing phone calls from debt collectors
- Putting a halt to any lawsuits or legal actions, such as a repossession
- Possibly stopping or preventing wage garnishments.
- Possibly being able to keep the property under a Chapter 13 bankruptcy.
- Ability to help credit rating in the long run
Disadvantages of Filing for Bankruptcy
While the advantages of filing for bankruptcy may seem ideal, it is important also to examine the disadvantages, such as:
- Some loans are not forgiven, including student loans, recent back taxes, child support, and legal bills.
- Bankruptcy remains on a credit report for up to 10 years.
- Fees, including filing fees, attorney fees, credit counseling fees, may be paid in payments, even after filing!
Is a Bankruptcy Right for You?
Bankruptcy may sound like the perfect solution to your overwhelming debt problem. However, this is not the right option for everyone. Answering the questions below can help you determine if filing for bankruptcy may be a viable option for your specific situation.
- Are you more than one month behind on your mortgage payments?
- Are you more than one month behind on your car payments?
- Have you received a notice of foreclosure or repossession?
- Would it be impossible to pay your debt off within five years?
- Have you taken out several payday loans that you can’t repay?
- Are you receiving multiple harassing phone calls from debt collectors?
- Do you owe back taxes?
- Are you unable to make the minimum payments on your debts every month?
- Are your debt payments so high that you cannot pay for everyday expenses, such as food, utilities, gas, and insurance?
Seek Legal Advice
If you answered yes to any of the above questions, bankruptcy might be right for you. Unfortunately, the bankruptcy process can be quite complex and confusing. If you fail to complete everything correctly and to include all of your debt, you risk not obtaining the full financial relief you deserve. It is best to seek legal advice from an experienced bankruptcy attorney.
The bankruptcy lawyer can walk you through the entire process, help you determine if you are eligible to file for bankruptcy, and explain to you whether Chapter 7 or Chapter 13 is the right filing option for you. Your attorney also will complete all the necessary paperwork and go to court with you to protect your best interests.