Advantages or Disadvantages of Filing for Bankruptcy

If you are considering bankruptcy, it is important to weigh the advantages or disadvantages of filing for bankruptcy.  Bankruptcy has long-term effects.  Depending on your financial situation, filing for bankruptcy may be right for you. For example, bankruptcy may be a good option for you if you have credit card debt, civil judgments, and past-due accounts.

Advantages of Filing for Bankruptcy

Filing for bankruptcy gives you a fresh start if you have mounting debt that you are unable to pay.  Filing for bankruptcy also allows you to start building your credit again. You can begin to rebuild your credit the day after your bankruptcy is final.  One of the biggest advantages of bankruptcy is the automatic stay that occurs immediately upon your filing of your bankruptcy petition. The automatic stay stops all ongoing legal actions against you, and prevents all your creditors from beginning any new legal actions.  The automatic stay makes all harassing letters and phone calls cease, and your creditors that have received notice of your bankruptcy case can no longer contact you directly. Your creditors can only contact your attorney to discuss your debt.

Additionally, after you file for bankruptcy, you may be able to keep all, or most of your property.  The federal government, along with your state, has exemptions.  For example, your home may qualify as a homestead exemption.   

Disadvantages of Filing for Bankruptcy

There are also disadvantages to filing for bankruptcy.  For example, your bankruptcy is a matter of public record and can appear on your credit report for up to ten years.  This can make it difficult to obtain credit after the bankruptcy.  Additionally, not all debts are dischargeable when you file for bankruptcy.  For example, debts relating to certain taxes, governmental fines, criminal or fraudulent conduct, child and spousal support, drunk driving, and most student loans are not dischargeable.  The cost of filing for bankruptcy is also a disadvantage.  The filing fee for a chapter 7 bankruptcy is around $300, and the fee cannot be waived.  Expect to pay between $1,000 and $2,500 for attorneys’ fees in addition to the filing fee.  Other disadvantages include severe tax consequences and in most cases, you can only file for bankruptcy once every eight years.  

Getting Legal Help

If you are considering filing for bankruptcy, speak with an experienced bankruptcy attorney in your state.  Filing for bankruptcy is a major decision that requires professional legal advice.  Speak with an attorney about the advantages or disadvantages of filing for bankruptcy.