Bankruptcy is often met with confusion and misunderstanding, and many people believe filing for bankruptcy means losing everything you own. However, that’s not the case. There are some benefits to filing for bankruptcy just as there are some drawbacks and of course, there’s an ugly side to it as well.
As you file for bankruptcy, you’ll receive immediate protection from any type of collection activity. This means that the automatic stay will stop foreclosures, license suspensions, repossessions, garnishments and creditor harassment. However, the stay might only be temporary depending on the situation. You can get more information from your bankruptcy attorney on how this automatic stay will affect you.
Every state will determine which assets will be exempted by the bankruptcy process. These are the assets that you can keep while filing for bankruptcy. There are several federal exemptions as well, so you may have to make the decision of choosing one particular set of exemptions over another. These exemptions normally include home equities, vehicles, furniture, retirement funds and other such things.
Chapter 7 bankruptcy means all unsecured debts included in the bankruptcy are to be discharged. This means you have no legal obligation to repay the debt. It’s important to make sure you compile a comprehensive list of your debts including car and home loans, or you may end up losing these assets.
Chapter 13 bankruptcy also includes back payments if you’re behind on payments such as car loans, mortgage, student loans or tax debts. These debts can be consolidated using a debt consolidation program into a monthly payment to fit your budget.
Bankruptcies are shown on the credit report for up to ten years. They make it difficult to get credit in the future such as credit cards, car loans, and mortgages.
Renters may struggle to find new housing as some landlords like to review credit reports before approving rental housing. Similarly, it’s harder to find a job after you’ve filed bankruptcy. While employers need your written permission to review your credit information, having bad credit or bankruptcy can create hurdles in your job hunt.
Insurers factor in the credit score when determining rates. As a result, insurance premiums may increase after bankruptcy, especially for home and auto owners.
Since bankruptcy is a public record, people can easily find out that you have filed bankruptcy, which can damage your business and personal reputation in the community.
Discharging any existing medical debts makes it difficult to get future medical care. While in most states medical providers are required to provide emergency services, in any other case, service can be refused or you may have to pay up front.
Bankruptcy also negatively impacts phone and utility services. These services could require advance payments or a deposit.
Filing for bankruptcy takes an emotional toll on you and can negatively affect your self-esteem as well as your financial future. You may feel like your ethics and personal morals are not compatible with bankruptcy.
In any case, you can also look towards other repayment options for your debts.