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What Is One Drawback Of Declaring Bankruptcy

Is Bankruptcy A Civil Judgement

The Pros and Cons of Declaring Bankruptcy

Bankruptcy itself is not a civil judgement. You will lose the right to collect if a creditor gets a judgment against you and the debt is dischargeable in a Chapter 7 bankruptcy. A judgment, however, can create a lien on your property. A lien is not automatically removed by bankruptcy. Therefore, it is possible to wipe out a judgment in bankruptcy while remaining obligated to pay the lien.

What Are The Advantages And The Benefits Of Filing For Bankruptcy

If you cannot pay off your debts, bankruptcy may be an option for you. There are several advantages of bankruptcy, including:

The Automatic StayBankruptcy puts into place what is known as the automatic stay. The automatic stay prevents any of your current creditors from collecting on their debts.

All forms of contact are included. You will no longer be able to be contacted by creditors to collect debts once the automatic stay is in place. While you attempt to resolve your financial issues, the automatic stay will protect you from creditors.

An automatic bankruptcy stay may also prevent your home from being foreclosed upon during the bankruptcy process and halt current court cases against you .

Discharging Your DebtsBankruptcies are primarily filed for this reason. It is difficult to improve financial health when debts get out of control. The debtor can, however, discharge many types of debt, allowing them to start over and make better financial decisions.

When you discharge a debt, it is completely erased, and you are no longer responsible for paying it. There are some types of debts that cannot be discharged, unfortunately. There are, however, many types of debt that can be forgiven, such as credit card debt and medical debt.

Rebuilding Your CreditYour credit score will initially be negatively affected by bankruptcy. If you file for bankruptcy, your credit score will suffer, and a record of the bankruptcy will appear on your credit report for 7-10 years.

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Understand What Bankruptcy Means

Unexpected or lengthy illnesses, sudden or prolonged unemployment, and many other factors beyond your control can plunge you into debt that you might struggle to recover from. Insurmountable debt can make it impossible to meet your daily needs and can also lead to persistent pressure and anxiety.

When that happens, you can file for one of many chapters of bankruptcy, which will allow you to greatly decrease or completely dismiss overwhelming debt. Bankruptcy protection is a federal process and cannot be filed or tried in a state court. Federal bankruptcy laws will allow you to begin the credit and finance journey over with a new start.

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When you file Chapter 7 bankruptcy, your assets are liquidated to pay off your debt. Your property and possessions will be at risk of being repossessed to ensure your debt gets paid. A Chapter 13 filing briefly safeguards your possessions because youre under a repayment plan, you may still face repossession if you dont stick to court orders.

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Disadvantages Of Filing For Bankruptcy:

The Bankruptcy and Insolvency Act is the legislation by which Licensed Insolvency Trustees administer bankruptcy files. The laws and regulations of the Act are meant to balance the scales between the need of an honest but unfortunate debtor for a fresh financial start, and the rights of the creditors. For this reason, declaring personal bankruptcy in Canada has some disadvantages:

  • Bankruptcy will lower your credit score for a minimum of six years from the time your bankruptcy is completed
  • Some of your assets may need to be surrendered, and/or a portion of your income above a certain level may need to be paid into your bankruptcy
  • In bankruptcy, you must provide the Trustee with detailed income and expense information
  • Your income tax refund, if you get one, is part of the bankruptcy and is forfeited to the Trustee for the year of bankruptcy

If you have reached the point where you are over-extended and can no longer afford your debt, the advantages of filing for bankruptcy or consumer proposal likely far outweigh the disadvantages.

What Would Be The Drawbacks Of Declaring Bankruptcy

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I am very sorry to learn of your legal troubles. I know these issues can be frustrating and it is my hope that we can get this resolved quickly for you. The potential disadvantages to bankruptcy include:

  • loss of credit cards
  • negative impact to credit score
  • long term inability to obtain a mortgage or loan
  • possible denial of tax refunds
  • debts that are not dischargeable in bankruptcy will still exist

Best regards,

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Do You Get Out Of All Your Debts If You File For Bankruptcy

Bankruptcy can renegotiate or erase many types of unsecured debts, such as on credit cards or personal loans. Other debts cannot be discharged in a bankruptcy, including:

The U.S. Bankruptcy Code lists 19 different categories of debts that cannot be discharged in:

  • Alimony and child support
  • Certain unpaid taxes, such as tax liens. However, some federal, state, and local taxes may be eligible for discharge if they date back several years
  • Debts for willful and malicious injury to another person or property
  • Debts for death or personal injury caused by the debtorâs operation of a motor vehicle while intoxicated from alcohol or impaired by other substances
  • Debts that you failed to list in your bankruptcy filing
  • Common/maintenance fees for condo association

Bankruptcy Pros And Cons

Indiana Chapter 7 Bankruptcy Explained

Being in over your head financially is frightening. If you find yourself in this unhappy position, several kinds of help are available. Bankruptcy is one of the alternatives for financial distress. You need to examine the options available to you for dealing with your financial problems and decide which course of action is best for you.

Bankruptcy FAQ

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What Happens When You File For Bankruptcy: What Bankruptcy Can Do

Bankruptcy allows people struggling with debt to wipe out certain obligations and get a fresh start. The two primary bankruptcy types filedChapter 7 and Chapter 13 bankruptcyeach offer unique benefits and, in some cases, treat debt and property differently. The chapter that’s right for you will depend on your income, property, and goals.

Here are things you can expect in both Chapters 7 and 13.

Laws Governing Bankruptcy In Canada

Federal bankruptcy laws are set out in the Bankruptcy & Insolvency Act.

The BIA defines three types of insolvency proceedings available to individuals seeking a resolution to their debts:

  • personal bankruptcy,
  • consumer proposal,
  • and a Division I proposal.

Bankruptcy can only be filed with a Licensed Insolvency Trustee. The role of the bankruptcy trustee is to ensure that the rules and laws around the bankruptcy process are applied fairly to both the debtor and creditors.

Bankruptcy legislation is what provides immediate protection from creditor actions, known as an automatic stay of proceedings. It is the stay that ensures collection agencies and creditors stop calling and allows your trustee to stop a wage garnishment.

Provincial laws also impact your bankruptcy, including legislation that defines what assets are exempt from seizure when you declare bankruptcy.

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Stop Wage Garnishment And Other Aggressive Collection Efforts

When you file for bankruptcy, collection efforts must cease. Eligible debt will be discharged or reorganized and restructured and included in a repayment plan . Wage garnishments and bank account levies will be stopped, and aggressive debt collectors will no longer be able to call or send you collection letters. Covered debt collectors will stop their activities and give you the peace of mind you deserve.

Excessive Cost Of Filing Bankruptcy

Important Questions to Ask Your Bankruptcy Attorney

Filing bankruptcy is costly. You need to pay around one thousand to two thousand dollars to an attorney for a regular chapter 7 bankruptcy. Incase of professional assistances, client need to pay even more.

Apart from these, there are many other disadvantages such as:

  • Bankruptcy will not pay off student loan debt.
  • You need to explain the reason of your bad financial phase to a judge.
  • In chapter 13, you need to follow a rigid budget for next 5 years in order to pay off a fair amount of your accrued debts.
  • You may lose many of your valuable assets.

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What Are The Cons Of Declaring Bankruptcy

Unfortunately, declaring bankruptcy also comes with some serious disadvantages. And this is why you need to think very carefully before you decide to go ahead.The cons of declaring bankruptcy include:

  • Both your business and personal assets may be sold to clear off your debts. Which means you may lose equipment you need to do business, such as your laptop or your car.
  • The bankruptcy will show on your credit report for six years. This period can make it very difficult to get any creditânot just a loan or overdraft, but also any service you’d usually pay for later, such as electricity .
  • You may be disqualified from being a member of your professional body, for example, if you’re an accountant or a solicitor. This exclusion can affect your ability to continue doing business.
  • You may find it difficult to get a job in specific sectors, especially if the job involves handling money.

Prevent Repossession Foreclosure And Utility Shutoffs

When you file for bankruptcy under Chapter 7 or Chapter 13, the bankruptcy court will issue an automatic stay that puts a stop to any and all collection efforts. This includes mortgage foreclosure, auto repossession, and other property repossession. You can take the additional time and relief from debt collection to get current with your mortgage, utility payments, and other remaining debts. You can also fold your car payments into your repayment plan, and you can protect other property from repossession. You get the second chance you need to make your payments current and completely eliminate covered debts.

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Reasons To File For Bankruptcy

There are some circumstances in which filing for bankruptcy may be your best recourse:

  • You’ve already tried to negotiate. Suppose that you have attempted to negotiate a repayment plan with one or more major , as experts often recommend as a first step, but they have not budged. They want their full payment and aren’t willing to be paid out over timeand you don’t have the means to make that payment. This can leave you with few options other than to file for bankruptcy.
  • Your liabilities far exceed your income and assets. Another major reason some individuals file for bankruptcy is that they simply cannot pay their debts, and just servicing the debtthat is, making the required monthly paymentsexceeds the monthly income they generate. For example, consider someone who owes $500,000 to a bank and whose monthly mortgage payment is $4,000. If this person only has income of $2,000 a month, and another $25,000 in assets to draw on, they may have few other options than to file for bankruptcy. Otherwise, they will deplete their assets in about a year and be completely unable to make that $4,000 payment going forward.

The Drawbacks Of Declaring Bankruptcy In Georgia

Personal Finance Q& A: How do I know when to declare bankruptcy?

While there are many benefits to declaring bankruptcy in Georgia, there are also a few drawbacks that youll need to understand before deciding whether to move forward. These include the following:

  • The Impact on Your Credit Score Both Chapter 7 and Chapter 13 will affect your credit score, although Chapter 7s effects last longer than Chapter 13s. However, unpaid debts and collections activities will also damage your credit score, and forgoing bankruptcy means continuing to deal with harassing debt collectors.
  • The Lingering Effects Declaring bankruptcy will mean you are not able to work with many lenders for several years after the initial filing. This will make borrowing money and applying for credit cards challenging for some time after filing.
  • Higher Interest Rates The lenders that do work with you will charge you more in interest because you represent a higher risk than someone who has not declared bankruptcy .
  • Lose Some Assets If you file Chapter 7, you are likely to lose some assets when they are sold to pay your creditors.
  • Public Record Your bankruptcy becomes part of the public record, which means that it will be available to anyone who wants to find it.
  • Many Debts Cannot Be Discharged Youll find that many types of debt cannot be discharged through bankruptcy. These include child support, alimony, back taxes, many types of student loans, and damages awarded in criminal lawsuits, including as a result of DUI.

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Disadvantages Of Declaring Bankruptcy

Bankruptcy should be the option of last resort. Not everyone should declare bankruptcy and there is a downside.

  • Doesnt discharge all debts. Bankruptcy excludes alimony, child support, fines & some student loans. It also does not deal with secured debts like mortgages.
  • Loss of non-essential assets. Bankruptcy affects what assets you lose or keep. If you have equity in your home, investments or other non-exempt assets, the Trustee will need to realize on this value and distribute the proceeds to creditors. You also lose any tax refunds during the bankruptcy period.
  • Impact on credit. A record of bankruptcy will appear on your for 6 years after discharge. You will also lose all credit cards.
  • Employment considerations. Declaring bankruptcy may impact employment if you are in charge of money or trust funds. In additional you are forbidden from being a director of a company while bankrupt.
  • Bankruptcy Is A Powerful Tool For Debtors But It Doesn’t Solve All Problems Learn What Happens When You File For Bankruptcy And What Bankruptcy Can Do To Help You Improve Your Financial Situation

    When facing financial difficulties, it’s essential to know what happens in bankruptcy before deciding to file a bankruptcy case. There’s no doubt that if you’re experiencing severe debt problems, filing for bankruptcy can be a powerful remedy. It stops most lawsuits, wage garnishments, and other collection activities. It also eliminates many types of debt, including credit card balances, medical bills, personal loans, and more.

    But it doesn’t stop all creditors, and it doesn’t wipe out all obligations. For instance, you’ll still have to pay your student loans unless you can prove hardship. You’ll also need to pay arrearages for child support, alimony, and most tax debts.

    Find out what happens in bankruptcy and how bankruptcy works, including:

    • what Chapter 7 and Chapter 13 bankruptcy can do
    • what happens only in Chapter 13 bankruptcy, and
    • what you can’t do in bankruptcy whatsoever.

    Once you understand the basics, you’ll likely want information targeted to your situation. Look for the links to additional resources at the end of the article.

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    Bankruptcy Downside #: New Financing May Be A Challenge

    The common conception with bankruptcy is that youll become a credit pariah. Youll be placed on a blacklist and traditional lenders will steer clear. But most of this fear is rooted in myth.

  • There is no such thing as a credit blacklist.
  • Although it may be tough to qualify for traditional prime loans and credit cards, there are other lending alternatives.
  • In other words, there are ways to get by as you rebuild credit and work to recover good credit. You can still buy a carand can even get yourself mortgage-ready in a short amount of time. And if you need , you can use secured credit cards if you cant qualify for unsecured cards.

    Rhode also explains that getting credit after you file often easier if you file for Chapter 7. Chapter 7 filers have a greater opportunity to acquire unsecured credit from new lenders than Chapter 13 filers do. The rebound in new credit cards occurred more slowly for Chapter 13 filers, possibly because they were using a portion of their income to pay down old debts and because they can file for bankruptcy again more quickly than Chapter 7 filers can.

    Should I Contact A Bankruptcy Lawyer

    The Office Show Mug: " I Declare Bankruptcy!"

    Bankruptcy may or may not be the best solution for your financial problems, depending on your situation, your debts, and how much property you need to protect. An experienced bankruptcy lawyer should be consulted if you are considering bankruptcy.

    The majority of people who file for bankruptcy in the United States do so with the assistance of an attorney, as with all court cases. Bankruptcies come in many different forms, and there are rules that go along with each. An experienced bankruptcy lawyer can be very helpful.

    Finding the right bankruptcy attorney is crucial since bankruptcy is a complex legal claim. A bankruptcy attorney can help you determine whether to file for bankruptcy and what type of bankruptcy you should file. Furthermore, if you decide to file, an attorney can ensure that your property is protected, all of your dischargeable debts are discharged, and your creditors do not violate your rights. By doing so, you will be on the right path to financial recovery when you complete your bankruptcy.

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