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What Are the Pros and Cons of Filing for Bankruptcy?

On Behalf of | Apr 27, 2016 | Firm News

Filing for bankruptcy is a big decision in the life of an individual and for a family. While the bankruptcy process can seem intimidating to those who consider it, the truth is that bankruptcy can be a valuable tool for people who have fallen significantly behind on debts. Depending on the type of debt you have and other factors, you may consider Chapter 7 bankruptcy or Chapter 13 bankruptcy. While Chapter 7 is extremely useful to discharge unsecured debts like credit card bills, Chapter 13 presents other useful features that may be more appropriate for individuals with significant amount of property or assets.

However, before one files for bankruptcy, a careful analysis of the situation should be performed. A starting point for that analysis can be a simple look at the pros and cons of filing for bankruptcy in order to make an informed decision. The next step in the inquiry is to speak to the bankruptcy lawyer who can analyze your finances and provide individualized advice and guidance. If bankruptcy seems like it may present a solution for your debt problems, contact The Bankruptcy Group today. To schedule a free consultation with a Sacramento bankruptcy attorney call 888-710-4334 today or contact us online.

What Are the Potential Drawbacks of Filing for Bankruptcy?

Perhaps the biggest fear that people have regarding bankruptcy is that their credit will be ruined and they will never be able to get a credit card or loan again. While there is some truth to your credit score taking a hit, the fear expressed above is overstated. The most scenarios people who file for bankruptcy can still obtain credit–but it is at less favorable terms than somebody with good credit. If you have an unsustainable debt burden, filing for bankruptcy can provide relief.

One drawback to filing for bankruptcy is that it may make it more difficult or impossible to file for bankruptcy later. Therefore, if you have a medical emergency or some other event that results in significant bills, your options to deal with this new debt may be limited. This is because there’s a limit on the frequency of bankruptcy discharges you can receive. If your debts are discharged under Chapter 7 bankruptcy, you will be unable to file for Chapter 7 again until six years have elapsed.

Other people are worried that they will have to explain to a judge exactly how they got into debt. While it is true that you will have to make a public court filing, there is generally not a significant stigma against bankruptcy. Furthermore, in all likelihood, the judge in bankruptcy trustee have heard stories much worse than yours. Concern regarding what others think about your filing is actually a sign that you have turned the corner and are concerned about establishing good financial health.

What Are the Benefits?

Filing of bankruptcy brings the immediate benefit of the automatic stay. If you have been harassed by bill and debt collectors, the relief brought by the stay is extremely welcome. The automatic stay functions as a type of temporary injunction that prohibits creditors from pursuing new collection activities against you. While, the automatic stay is only temporary it does provide relief force creditors to work through the bankruptcy process.

However, the biggest benefit of bankruptcy is its ability to handle debt. In a Chapter 7 bankruptcy, most unsecured debt can be eliminated. That means that credit card bills and other debts can also be eliminated using the Chapter.

Even if you cannot file for Chapter 7 bankruptcy, you will likely qualify for a Chapter 13 filing. Chapter 13 cannot wipe away debt, but it does allow you to protect your property. A Chapter 13 plan can also provide more time to repay your debts. An individual can repay their debts under a three-to-five-year plan. Since payments go through the bankruptcy trustee, the individual is freed up from dealing with multiple creditors and the harassment that can occur if the payment plan was not under the supervision of the court.

Work with Sacramento Bankruptcy Attorneys in California

Bankruptcy can provide significant benefits for individuals seeking to handle their unsustainable or unmanageable debt burden. However, before taking any action, make sure to speak with a Sacramento bankruptcy lawyer who can provide individualized advice and guidance. To schedule a free and confidential consultation, call 888-710-4334 today or contact us online.