Just like any other big decision you will face in life, filing for bankruptcy has advantages and disadvantages. The important thing to remember is that the disadvantages of bankruptcy are generally short term while the advantages stay with you for a long, long time.
The primary disadvantages that you will face when filing for bankruptcy are:
- It will have a negative impact on your credit. But, if you are filing for bankruptcy then odds are you don’t have perfect credit anyway so it is not a major concern. Plus, after the bankruptcy, you will be in a much better place to start repairing your credit immediately.
- In the beginning you will have to pay higher interest rates for loans and credit cards.
- A bankruptcy will stay on your credit record for ten years but that is not entirely a bad thing. Some lenders actually look for people that have filed for bankruptcy because they know you can’t file another for seven years.
- Most of the above disadvantages will disappear as you do a little rehab on your financial situation after the bankruptcy has been completed.
There are numerous advantages to bankruptcy and you should speak with a bankruptcy attorney for specifics but the most noticeable are:
- A fresh start – Once you get into a bad enough situation that only bankruptcy can save you, your quality of life is generally pretty low. Your stressed out, broke and don’t see any option for getting your life back to where you want it to be. After a bankruptcy, you have a clean slate and with the proper discipline, you can build your finances back up in a matter of years.
- An automatic stay – The automatic stay is a shield for you while you work out your problems through bankruptcy. It stops most types of collection actions and keeps the creditors from harassing you. It can even stop things like foreclosure, repossession and wage garnishment.
- Discharged debts –Most of your debts will be cleared and no creditors will have a hold on you anymore. The only debts that will survive are secured debts like tax obligations or student loans.