Having more debts than you can pay back makes for a very terrible situation. As one bill after another goes unpaid and people start calling you persistently to get their money back, you might start looking for ways desperately to get out of all the debts. This is the time when you might also start wondering whether filing for bankruptcy is the only option left for you.
This option can definitely be considered when you find yourself sinking due to the weight of the debts you have procured over the years! When you feel like there is no way out of your problems, the option of filing for bankruptcy can make you believe that life has a restart button!
However, before you actually go forward with your decision to file for bankruptcy, it is better to know all the advantages and disadvantages associated with it.
Types of Bankruptcy Claims
There are four types of bankruptcy cases provided by law that people can file. These different types of bankruptcy are:
- Chapter 7- Also known as a liquidation bankruptcy or a straight bankruptcy. It can help release you from most or all of your financial debts. When you file for this case however, you may need to liquidate some of your nonexempt assets.
- Chapter 11- It is also known as reorganization bankruptcy. This case is often filed by those individuals who are under very large debts. This is the most common bankruptcy case that is filed by people.
- Chapter 12- This type of bankruptcy is filed by family farmers.
- Chapter 13- This type of bankruptcy is also known as debt adjustment where proper payment plans are created to help debtors pay back the creditors of a short period of time. This type of case is filed by those who get a regular monthly pay through their work.
The Advantages of Filing for Bankruptcy
There are a few advantages that come with filing for bankruptcy. They are as follows:
- Your personal assets like your car, home and other properties cannot be taken from you to repay the creditors.
- You might be able to modify your debt, or eliminate it entirely with the help of bankruptcy.
- When you file a bankruptcy case, you will be released from the continuous stress of all the collection stress like collection calls, letters, and foreclosure court cases. This is because they are halted immediately when the case is filed.
- Your personal debts due to mortgage deficiencies and business obligations can also be eliminated.
- The bankruptcy code can protect you from any future collection processed like foreclosure, repossession, and frozen bank accounts when the bankruptcy case is filed.
- All your unsecured debts such as medical bills and credit card bills are eliminated or discharged through bankruptcy.
The Disadvantages of Filing for Bankruptcy
Just as there are some advantages of filing for bankruptcy, there are some disadvantages to it as well. You must go through the possible consequences of bankruptcy before proceeding to file the case. Here are a few disadvantages of bankruptcy:
- The cost for legal assistance when filing a bankruptcy case is a big factor which must be considered when deciding whether to do it or not.
- Any nonexempt property that you own faces a threat of being sold off to pay the creditors off. A nonexempt property is that which exceeds the allowance granted to your through the bankruptcy law.
- When bankruptcy is files, a bankruptcy discharge is reported for several years on your credit history. This makes little difference for your credit score, which drops anyway, even if you don’t file a case.
How to Make the Right Decision?
If you feel confused or do not have a clear idea of what route of actions you must proceed with, then taking legal advice is highly recommended. Expert and experienced attorneys who have handles bankruptcy cases successfully in the past can evaluate your situation and guide you in the best direction. Doing so can also help you to ensure that you do not take any unlawful steps and do everything right, to receive your desired results.