Pros and Cons of Bankruptcy
Like everything else in life, there are two sides to bankruptcy. It has its advantages as well as disadvantages.
- It discharges most of your debts.
- Once you file for bankruptcy, an automatic stay comes in to operation. As long as this automatic stay continues to operate, your creditors cannot take any steps to collect the debt.
- If you file a Chapter 7 bankruptcy, you will continue to retain your non-exempt assets. If you file a Chapter 13 bankruptcy, you can retain all your assets as long as you make the payments according to your repayment plan.
- Once a debt is discharged in bankruptcy, you are no long liable for that debt. The creditor cannot take any steps to collect a discharged debt.
- If you file a Chapter 13 bankruptcy, you can prevent foreclosure and make your mortgage payments currents. You can also use Chapter 13 bankruptcy to strip a second mortgage.
- When a debt is discharged in bankruptcy, the credit reporting agencies are required by law to report the balance of such discharged debts as zero.
- Some debts such as tax debts, alimony payments and other court order payments will survive bankruptcy.
- The trustee in a Chapter 7 bankruptcy will take over and sell your non-exempt assets.
- Bankruptcy is a complex process. The use of wrong forms can result in your petition being dismissed. Once your petition is dismissed, there are restrictions on future filings.
- Even if you receive a discharge, you may not be able to file another bankruptcy petition almost immediately.
- Your credit score will be hit. This will cause problems if you want to obtain credit.
- Bankruptcy will remain on your credit report for some time (10 years in case of Chapter 7 and 7 years in case of Chapter 13). Your credit report is a public document and so everyone who sees your credit report will know that you have been through bankruptcy.