Bankruptcy is not a one-size fits all solution to debt problems. Filing for bankruptcy protection is a financial decision. It’s a decision that can empower you to take control of your financial future. Bankruptcy is a legal tool that has the power to erase debts. But bankruptcy has pros and cons. Before deciding if bankruptcy is the best solution to your debt problem, it is important for you to explore how filing will impact you specifically.
The Pros of Bankruptcy
- Erases most unsecured debts: including credit cards, medical bills, certain older tax debts, personal loans, and other types of credit or loans that were given without a collateral requirement.
- Debts are erased forever: after a successful bankruptcy case, you will no longer be legally obligated to pay back your dischargeable debts, ever.
- Retain most or all of your assets: bankruptcy allows you to erase debts and keep most or all of your belongings.
- Stops aggressive collection activity: once you file your creditors must stop all collection action against you―bankruptcy stops harassing phone calls, wage garnishment, bank levies, and lawsuits filed by creditors.
The Cons of Bankruptcy
- Not all debts can be erased:
- Dischargeable debts can be erased in bankruptcy, including credit cards, medical bills collection agency debts, personal loans, certain older tax debts, most civil court judgments (unless based on fraud), and other unsecured debts.
- Nondischargeable debts cannot be erased in bankruptcy, including student loans, certain newer tax debts (LINK to Blog #3), back child or spousal support, and civil or criminal debts based on fraud.
- Debts that are nondischargeable survive bankruptcy and you will still be legally obligated to pay them regardless of filing.
- The timing of when to file is crucial:
- Certain older tax debts can be erased – be mindful of your filing date so you can take full advantage of income tax debt dischargeability.
- Only debts you incur before the date you file for bankruptcy can be discharged. Any debt you incur after the date you file is not part of your case and will not be erased.
- Bankruptcy law places restrictions on how often you may receive a bankruptcy discharge.
- Bankruptcy will adversely affect your credit report and credit score:
- Bankruptcy will report on your credit report for 7 years after your filing date if you file for Chapter 13, and will report for 10 years if you file for Chapter 7.
- In the short-term bankruptcy will lower your credit score, but so long as you take steps to rebuild your credit after bankruptcy it will begin to recover fairly quickly.
Weighing the Pros and Cons of Bankruptcy
It is up to you to explore how bankruptcy will benefit you and if filing truly is the right solution for you. Only you can decide how to best address your debt problems.
The above are only a few of the pros and cons of filing for bankruptcy. To explore if bankruptcy is right for you, we invite you to meet with us for a free, no-obligation consultation. Here at the Law Office of Barbara B. Braziel, we will strive to make sure you understand the protections and benefits of bankruptcy and how filing with affect you and your family.
Call us today at (912) 351-9000 or contact us to schedule a free consultation.
Find out more about Bankruptcy in our guide: All About Bankruptcy.
We proudly serve the people of Savannah, GA and the surrounding areas, including Richmond Hill, Hinesville, Pooler, Port Wentworth, Tybee Island, Clyo, Ellabel, Midway, Ludowici, Springfield, Pembroke, Brooklet, and Garden City.
We are a debt relief agency. We help people file for bankruptcy relief under the U.S. Bankruptcy Code.