What are the Disadvantages of Filing for Bankruptcy?
The most obvious disadvantage of filing for bankruptcy is that it will ruin your credit for at least 7-10 years. Some other disadvantages include:
- Losing credit cards
- Losing non-essential possessions
- Inability to obtain a mortgage for some time
- Embarrassment
- Not all debt will be discharged
Will Filing for Bankruptcy Wipe Out All Debt?
There are certain categories of debt that may not be discharged by a bankruptcy filing, including: - Past due child support, alimony payments, and other debts resulting from divorce settlement agreements or divorce decrees
- Student loans except in certain exceptional circumstances
- Income taxes that are less than 3 years past due
- DUI judgments against the debtor
- Debts incurred by fraudulent means, such as writing a bad check or providing false information on a credit application
If a large portion of the debt is non-dischargeable, it may not make sense for the debtor to file for bankruptcy.
Are There any Advantages to Filing for Bankruptcy?
As soon as a debtor files for bankruptcy, there is an automatic stay and most creditors must stop their collection efforts. Thus, the debtor can begin rebuilding his credit; financially-speaking, the debtor can start over.
It is true that filing for bankruptcy ruins a debtor's credit from a number of years and may cause embarrassment. However, incurring more debt and facing the harassing phone calls, letters and potential lawsuits from creditors can have the same effect. Filing for bankruptcy will allow many debtors to get started sooner on rebuilding their credit in peace.
Will Some Property be Protected?
Certain categories of property may not be taken by creditors after a debtor files for bankruptcy. The type of exempt property will vary from state to state but typically includes motor vehicles up to a certain value, some clothing and household furnishings, life insurance and portions of earned wages.
Should You Contact a Bankruptcy Lawyer?
Bankruptcy can be a complicated process. It is vital to know how the law regulates bankruptcy in your state, including what property exemptions you can claim. A lawyer knows the ins-and-outs of filing for bankruptcy, and can recommend what chapter of bankruptcy is right for you. |
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