Before you jump into a personal bankruptcy filing, it is important to carefully weigh all of your debt relief options. There are pros and cons to filing a bankruptcy and you must understand both the good and the bad consequences of your decision to file a Chapter 7 or Chapter 13. Although each bankruptcy case is unique and you should have one of our experienced bankruptcy attorneys review your individual finances, the following are a few of the advantages and disadvantages of a personal bankruptcy:
A personal bankruptcy is the most comprehensive means for dealing with your debt. All of your creditors must be included in your filing, so when you receive your discharge order, it truly provides you with a fresh financial start. Additional benefits include:
- The majority (if not all) of your debts will be eliminated and you are no longer legally obligated to pay them.
- The automatic stay goes into effect as soon as your bankruptcy petition is filed, which means that all collection activity against you will stop.
- In many cases and depending on which chapter you file under, you probably will be able to keep possession of all of your assets.
- If you file a Chapter 13 and you must repay all or a portion of your creditors, you can create a manageable repayment plan and spread out your payments over three to five years.
- You may qualify to remove inferior mortgage liens from your home. This means that the inferior mortgage will be treated as an unsecured debt which is typically paid mere pennies on the dollar owed.
- As soon as you obtain your discharge of debt, you can immediately begin working to rebuild positive credit.
Nobody wants to have to file for bankruptcy protection. However, due to our economy and the vast number of people that have had to file a Chapter 7 or Chapter 13 case, it is not as embarrassing as it once was. Other negatives regarding bankruptcy include:
- Your credit score will be negatively impacted. For many debtors who have already damaged their credit rating with late payments, collection lawsuits, garnishments, foreclosures or asset seizures, the effect on their score is not significant.
- Having a bankruptcy notation on your credit report can make it harder for you to qualify for a mortgage loan until your credit score improves
- Depending on what type of bankruptcy case you file and your individual situation, there may be a small risk that some of your assets will be used to pay creditors
- In order to take advantage of your fresh start, you must live on a budget and change any irresponsible spending behaviors
- Once you have filed a bankruptcy and received a discharge, you cannot file for bankruptcy relief again for several years
To learn more about the consequences of filing for bankruptcy protection, contact Faro & Crowder to schedule an appointment. Our office is located in Melbourne, but we proudly serve businesses across the State of Florida.