Nothing strikes fear into the hearts and minds of the debtor quite like a bankruptcy claim does. Although bankruptcy is a serious process and one that must be considered carefully, it’s also the only way out for many that have tried exhaustively to get out of debt. While most people would rather not have their credit record tarnished by a bankruptcy, the fact remains that filing for bankruptcy can be a saving grace in some cases, allowing the debtor to eventually repair their finances and get on with their life. The following article will list some of the most common pros and cons when it comes to filing for personal bankruptcy protection.
While many financial professionals would have you believe that you must avoid bankruptcy at all costs, the truth is that it can be quite an effective process for certain individuals and circumstances. Depending on the type of protection you seek, you can rid yourself of a large portion of your debt. With that said, there are some types of debt such as student loans, liens and child support that you will need to pay back through and even after the bankruptcy process ends. A bankruptcy filing can also put a stop to harassing creditors, which is known as a “stay.” Once you file, creditors can no longer contact you directly; rather, they will be required under the bankruptcy court to seek payment in a formal hearing.
Of course, there are also many real consequences to filing for bankruptcy, the most significant being severe damage to your credit record. In fact, a bankruptcy will stay on your credit record for at least 8 years, making it nearly impossible for you to attain credit during that time. Claiming bankruptcy can also be an embarrassing process and can affect your ability to seek employment. Though your current employer can’t discriminate if they learn of your financial misfortunes, a potential employer can check into your credit and disqualify you based on what they find.
Ultimately, making the decision to claim bankruptcy should only be done after careful consideration of the pros and cons in addition to the alternatives that exist. As always, when it comes to your finances, you should seek the advice of a qualified professional.
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