What Are The Pros And Cons Of Bankruptcy

Dont Have The Time To Deal With This

The many steps and forms involved seems like a daunting process. With work and other family obligations, how does one find the time to gather documents and attend court meetings?

Bankruptcy Attorney Response:

The process is made to be smooth at our office. We offer numerous ways to be flexible and obtain the information we need to prepare the documents on your behalf and answer any questions you have. We make sure that you feel like youre in the right hands so you can better focus your time elsewhere.

What Happens During Your Bankruptcy Before Its Discharged

Student loans are almost never included in a bankruptcy. If you can show that your student loan payment is an undue hardship on you and your family, the student loans may be discharged in the bankruptcy. It is very difficult to prove undue hardship unless you are physically unable to work and there is no chance of you making money another way. To discharge your student loans under this special case, you must file a separate motion with the bankruptcy court and present your situation before a judge.

If you want to keep a credit card when;filing for bankruptcy, it has to have been without a balance for a long time. In other words, you dont have to list a credit card if theres no balance on it and if there hasnt been a balance for quite some time. All credit cards that you have NOT paid off or even RECENTLY paid off have to be declared in the bankruptcy or it could be considered fraud.

You will have your chance to explain to the judge how you got into the financial situation you are in and why you need these debts to be discharged in the bankruptcy. Although bankruptcy filing can be embarrassing, it may be the only way to give you and your family a chance to start over. After declaring bankruptcy, people can begin the slow process to;reestablish their credit;and start their lives over on an even level.

Reasons To Consider Filing Business Bankruptcy

Your business might be drowning in debt and the future is uncertain. Although it may seem that you have no other alternative than to file bankruptcy, that is not necessarily the best option. The first step to deciding whether to file bankruptcy is to review your financial situation. If you are behind on payments or making only minimum payments, using credit cards to pay for business needs, and get regular calls from collection agencies, you may want to consider bankruptcy.

Don’t Miss: What Is Epiq Bankruptcy Solutions Llc

Advantages Of Filing Bankruptcy

Relief From Creditors and Debt If creditors are hounding you with phone calls and letters to demand payment, your filing for bankruptcy will force them to stop. Filing bankruptcy either discharges your debts or restructures them into a new payment plan thats easier to cover. Either method can help you achieve a more manageable financial position.

Protection for Your Personal Assets Bankruptcy laws shield some of your personal assets, like your retirement savings and personal residence. That way, creditors are limited to what they can take as you settle your case.

A Chance to Start Over Filing bankruptcy can give you a second chance. With restructuring, you can keep running your business but on better credit terms. On the other hand, with Chapter 7, you can wind down a company that just isnt working anymore so you can move onto something else.

If You Have Good Credit It Will Likely Take A Temporary Hit

Those that are able to maintain their monthly payments and keep their credit score high before filing their bankruptcy petition will see their score drop initially. But, a bankruptcy filing often does more good than harm to the filerâs credit score. Plus, once their bankruptcy discharge is granted, they can begin increasing that pesky credit score immediately.

You May Like: What Is Epiq Bankruptcy Solutions Llc

The Pros And Cons Of Bankruptcy

We often get asked by people who are considering bankruptcy, what are the positives and negatives of bankruptcy and what legislation applies to bankruptcy.

Bankruptcies in Australia are administered under the Bankruptcy Act. The intent of this legislation is to resolve extreme financial problems.

To assist you to consider bankruptcy, we have provided below our summary list of the pros and cons of bankruptcy. We encourage you to give us a call on or email if you would like to explore the pros and cons of bankruptcy relevant to your circumstances.

How Does Surrendering A Vehicle In A Bankruptcy Work Can I Get Rid Of The Debt If I Give It Back

Bankruptcy is usually considered a last resort due to its severe impact on your creditworthiness and future borrowing needs. However, it may be the best option for those who need to get rid of debt.

There are several reasons why you might consider surrendering your vehicle in a bankruptcy. The monthly payments could be too high or you may be several months behind on them. There could also be excessive wear and tear on the vehicle to the point where it no longer runs well, if at all.

Before you decide to give up your vehicle, its important to understand how bankruptcy works and the different ways to go about surrendering your vehicle.

Also Check: How Many Times Has Donald Trump Filed For Bankruptsy

Do You Qualify For Bankruptcy

Before we get to explain some of the main requirements to apply for bankruptcy, its important to note that there are three types of bankruptcy:;

• Chapter 7 Bankruptcy: When you apply for chapter 7 bankruptcy, the federal court will access any property you have and make means of it, selling these assets in order to use the money to pay off your debt and wipe out your balance.
• Chapter 11 Bankruptcy: Chapter 11 bankruptcy has some benefits since it means that the debtor remains in possession of their actives and can even still be in charge of their business. The debtor can borrow more money and a reorganization plan is devised, which all creditors must approve. Chapter 11 bankruptcy is also called a reorganization bankruptcy.;
• Chapter 13 Bankruptcy: In the case of chapter 13 bankruptcy, you get to keep your properties and the federal court devises an extended payment plan in which youll have to pay your debts partially or totally to wipe out your debt.;

To qualify for either Chapter 7 bankruptcy or chapter 13 bankruptcy, you cant have filed for any type of bankruptcy in at least 5 years. You also need to prove that your income in the previous six months is lower than the median income for a same-sized household in your state. Youll also be investigated to avoid creditors-fraud.;

Cons Of Filing Chapter 7 Bankruptcy

1. A bankruptcy stays on your credit report for up to 10 years. While this is a negative aspect of Chapter 7, you can begin rebuilding your credit immediately.2. You can only file bankruptcy once every eight years. If you have additional financial problems down the line, filing a Chapter 13 repayment plan may be an option.3. You are only allowed a certain number of exceptions. If you exceed that amount, you will be required to give the court the excess.4. The legal process can be daunting and some find it embarrassing. You will have to appear in court at least once, and perhaps more if any creditors dispute your discharge.5. Secured debts are dis-chargeable. Also, the property will need to be returned to the creditor and or a settlement price negotiated.;

Recommended Reading: Can I File Bankruptcy Without My Spouse Knowing

It Stays On Your Credit Report For Up To 10 Years

Your bankruptcy will remain on your credit report for up to 10 years from the date of discharge. While the impact it will lessen over time, it will undoubtedly be a factor in any financial or career move that requires checking your credit.

Its not all roses after you file bankruptcy, McClary told LendingTree. There are some limitations that youre going to have to face.

Federal Student Loans Are Exempt From Bankruptcy

In most cases, your federal student loans will not be dischargeable; while there are some exceptions, they are rare. According to McClary, you should expect that your federal student loan debt is not going to be dischargeable through bankruptcy.

However, Colwell, who has been a bankruptcy attorney for over three decades, said they can still be addressed. Even though you cant get rid of student loans, we can at least control them. If is dipping into someones Social Security money or is garnishing wages for an enormous amount, we can rewrite how much they get paid. We can control them for a three to five year period.;

Read Also: How To File Bankruptcy In Wisconsin

Cons Of Declaring Bankruptcy

If youre simply looking at the positives of bankruptcy, then it almost seems too good to be true. The reality is that it often is, and individuals need to seriously weigh up the potential negatives before declaring bankruptcy.

Bankruptcy might give you a fresh financial start, but you stand to lose high-value possessions such as your car or even your family home. Its also a public matter, and you can struggle to gain credit for many years.

Its important to weigh up the pros and cons, and to remember that there are other alternatives to bankruptcy, too. Speak to a professional insolvency practitioner for more detailed information, as every individual is in a different situation.

Lets take a look at the most important cons of declaring bankruptcy.

How To Recover From Bankruptcy

The word bankruptcy sounds quite scary and can make anyone nervous. But the truth is, there is a large percentage of individuals and even big companies whove filed for bankruptcy at least once as a way of letting them reassess their financial state and put things in order.;

The important thing to remember is that bankruptcy is not a death sentence and you dont have to go through it alone. The first thing you can do is reach out to a lawyer and get legal assistance through the whole process. In addition to this, there are some steps you can take in order to slowly recover from bankruptcy and get your life back on track.;

Don’t Miss: What Is A Bankruptcy Petition Preparer

Pro: A Chance To Regroup

Filing for bankruptcy gives you breathing room. No matter what type of bankruptcy youre filing, doing so ensures that youll be able to regroup and focus on charting a path forward. In addition to ending demand letters and some legal threats, this lets you stop calls from creditors to your home and, potentially, your family and business location. In some cases, filing for bankruptcy can let you sleep more comfortably at night and recover from the downward spiral;out-of-control debt;can cause.

How To Decide Whether Or Not To Go Bankrupt

Individuals considering bankruptcy should weigh up the pros and cons discussed above before deciding whether to proceed. If there is no prospect of improvement in their financial situations – and if their debts will take many years to repay – bankruptcy may prove to be a sensible option. However, they should first consider alternative ways of dealing with debts.

Potential bankrupts should assess the consequences of bankruptcy upon the full value of their assets – particularly if they own significant equity in their home. Furthermore, certain professions apply restrictions on membership regarding individuals who have been bankrupt, so it is important to check this aspect as well.

Read Also: How Many Bankruptcies Has Donald Trump

Prevention Of Further Legal Action

The biggest benefit, said McClary, is that you could get cleared of debt that you owe and youre having difficulty paying. And it could potentially head off any future legal trouble that you have related to the non-payment of that debt. However, he cautions that if there is already a case in court at the time you file bankruptcy, based on the timing, you may not be cleared of it.

What Are The Pros & Cons Of Filing Chapter 7 Bankruptcy

When harassing creditors seem to overwhelm your daily routine, and you find yourself struggling to make ends meet, it may be time to consider filing for bankruptcy. Chapter 7 Bankruptcy is a petition that asks the court to erase your debts and give you a fresh start. It is a straightforward process that wipes the slate clean.

While it may seem easy, there are many things to consider when making this drastic step toward financial freedom. Ask any;Northern Kentucky bankruptcy lawyer, and you will find there are both pros and cons to the process.;

Read Also: Which Of The Following Phrases Best Summarizes Chapter 7 Bankruptcy?

Now We Give You The Cons Or Consequences Of Bankruptcy And They Are:

• Bankruptcy lasts for 3 years and 1 day.
• You cannot buy assets while you are bankrupt, for example, a boat or shares in a company.
• If you are involved in litigation, you may not be able to continue the Court proceedings
• Bankruptcy is shown on your credit record during your bankruptcy and for a further two years.
• You will have difficulty borrowing money while your bankruptcy and any prebankruptcy defaults are shown on your credit record.
• Bankruptcy may negatively impact licenses you hold that are relevant to your earning an income. You should make inquiries on the effect bankruptcy will have on your registrations and if appropriate, your employment contract.
• Bankruptcy is shown permanently on the National Personal Insolvency Index , which is maintained by the Federal Government.
• You cannot be a Trustee of a Self-Managed Super Fund whilst you are bankrupt.
• You cannot be a director of a company while bankrupt.
• If you are going to incur credit of more than $ 6,017 while bankrupt, you must first disclose your bankruptcy to the lender.
• If you receive an unexpected or expected windfall while you are bankrupt, like a lottery win, gambling win, or inheritance, the money is required to be paid to your bankrupt estate. If this happens to you and there are sufficient funds to pay your creditors, then creditors and the cost of your bankruptcy will be paid by the bankruptcy trustee and your bankruptcy will be annulled. Funds left over will then be paid to you by the bankruptcy trustee.

What Are The Main Consequences Of Bankruptcy

The practical implications of bankruptcy include:

• most debts are written off

• assets need to be relinquished and disposed of by the bankruptcy trustee

• bank and building society accounts will be frozen and controlled by the trustee

• during the bankruptcy period, accessing any form of credit is extremely difficult

Read Also: How Long After Filing Bankruptcy Can You Buy A Home

What About The Pros And Cons Of Filing Chapter 13 Bankruptcy

Chapter 7 and Chapter 13 bankruptcy are both powerful debt relief options for folks in need of a fresh start. But the pros and cons of filing Chapter 13 bankruptcy are quite different than for Chapter 7. If you have a high disposable income or non-exempt assets you want to protect, Chapter 13 may be right for you. Check out this article to find out more about the pros and cons of filing Chapter 13 bankruptcy.

Advantages And Disadvantages Of Filing For Bankruptcy

Many who qualify for bankruptcy never avail themselves of its potential benefits. While it is true that a bankruptcy filing can affect a persons finances for years to come, for many people, filing is the best option. However, every persons financial circumstances are unique to his or her situation. Deciding if, when and how to file for bankruptcy is a very complicated process and the consequences of filing when you shouldnt can be considerable. It is important to consult with a skilled bankruptcy attorney to determine whether bankruptcy is your best option. We invite you to contact us at Arnold & Smith, PLLC to arrange a free consultation with one of our experienced attorneys to discuss your particular situation and how a bankruptcy could impact your financial situation.

Advantages of filing for bankruptcy include:

The potential disadvantages of bankruptcy include:

You May Like: How To File Bankruptcy In Wisconsin

Use A Secured Credit Card

Secured cards have a credit limit thats based on a cash deposit you must make and acts as collateral. By this, banks can lower their risk of lending you money once your credit score has been affected. Your bank will report your on-time payments directly to credit bureaus so you can rebuild your credit.;

Related:;Debt Free 15 Smart Ways to Pay off Credit Card Debt

What Happens After Your Bankruptcy Is Discharged

A bankruptcy will stay on your credit report for 7-10 years and that could also hinder you when applying for a job, buying a car or even getting life insurance. Obtaining a mortgage within 2-3 years after the discharge of a bankruptcy would most likely be very difficult. You may find lenders out there willing to work with you but chances are youll need a large down payment and youll be hit with a very high interest rate. It is up to each credit card company on how long after a discharge they will approve someone for a credit card. Expect to get some credit card offers with extremely high interest rates and annual fees at first.

You May Like: Bankruptcy Document Preparer