People have the legal choice to file for bankruptcy, which might provide relief if they find it difficult to pay their debts on time. Regardless of the fact that filing for bankruptcy can significantly reduce one’s financial burden, there are advantages and disadvantages to doing so. It could be challenging for you to subsequently qualify for new sorts of credit, despite the fact that it can offer you a new beginning. So analyzing the consequences of bankruptcy is a must before taking the decision of filing for bankruptcy. Let’s find out the pros and cons of filing for bankruptcy.
What Are the Cons of Filing Bankruptcy?
Although filing bankruptcy can be advantageous in certain situations, it’s also critical to be aware of its drawbacks. Some of the cons are described below.
Your belongings could be seized
The court may seize some of your belongings throughout the bankruptcy process and sell them to satisfy your creditors. With the help of a lawyer, your property may be protected from creditors through bankruptcy exemptions. It is usual for people who file for bankruptcy to secure all of their assets by making use of bankruptcy exemptions.
Some Debts Are Non-Dischargeable
The significance of this can’t be emphasized. Many debts kinds can be dismissed in bankruptcy, but not all types. Legal fines and tax debts are frequently not dischargeable. Alimony and child support payments imposed by the court are not dischargeable. Discharge of student loans, which might be quite huge amounts, is essentially impossible. Remember that bankruptcy only affects obligations that you personally owe as well. If you jointly owe the loan to another person, that person will be solely responsible for it. Additionally, liens that are affixed to your assets cannot be released by filing for bankruptcy. Some debts may be avoided throughout the bankruptcy procedure by submitting motions with the help of an attorney to the court.
Limitations on Bankruptcy Filing
After declaring bankruptcy, you have around 6 years until you may do it again. If new debts develop after filing for bankruptcy, you might not have access to similar relief. Bankruptcy can also have a detrimental impact on your way of life and long-term financial condition. You should consider your options carefully before declaring bankruptcy owing to the list of drawbacks. Many people view bankruptcy as embarrassing and react negatively to it. Not to mention that having filed for bankruptcy can have a detrimental effect on both your personal and professional life. Although the pros of bankruptcy frequently outweigh the drawbacks, you should consider the advantages and drawbacks for yourself.
What are the pros of declaring bankruptcy?
Although it shouldn’t be done lightly, bankruptcy can provide customers who are buried in debt with a much-needed life raft. Here are a few pros of filing for bankruptcy.
Dealing with many creditors will relieve you
The stress and daunting aspect of managing numerous creditors can be lessened by filing for bankruptcy. In fact, after your debts are dismissed and you are released from part or every one of your financial commitments, you might feel immediate relief.
A representative selected by the court will be sent to you
Once you submit your bankruptcy petition, a trustee will be appointed to handle your case from filing to discharge. They will act on your behalf throughout the process, managing all interactions with your creditors, and, in the case of a Chapter 13 bankruptcy, they will be the ones to take payments from you and process them.
Some back taxes are addressable
When wages are being withheld due to unpaid taxes, filing for bankruptcy may be an efficient solution. If you file for bankruptcy you are not also liable for paying your mortgage. Some earlier tax debts may be forgiven in bankruptcy, while the majority cannot be. Your tax liabilities should be income taxes and have a minimum maturity date of three years in order to qualify. Payroll taxes and fraud penalties are never qualified for discharge.
Bankruptcy may halt the foreclosure of a home or the repossession of a vehicle
Insolvency under Chapter 13 may be used to halt or delay a car repossession or foreclosure. Keeping your car may be possible if it qualifies for exemption laws As an illustration, a federal exemption permits you to have up to $4,450 in car equity. For instance, if your car is worth $4,000, you might be able to keep it since it qualifies for a federal exemption.
Finding the best bankruptcy lawyer is essential because filing for bankruptcy is a complicated legal claim. You can get advice from a bankruptcy lawyer on whether you should file for bankruptcy and what kind of bankruptcy to file for. I hope you have got a clear understanding of the pros and cons of filing for bankruptcy by reading this article.