Pros and Cons of Filing Bankruptcy
The choice between filing for bankruptcy should be made only after weighing the potential benefits and pitfalls that are involved because the financial consequences are lasting. The pros and cons of filing bankruptcy vary by Chapter (Chapter 7 or 13), and their capability to solve specific debt issues. Chapter 7's express purpose is pay off your debts from liquidating your non-exempt property, whereas Chapter 13 sets up a three to five year repayment period after which the debtor is completely debt free.
Pros and Cons of Filing Chapter 7 Bankruptcy
The biggest con of filing Chapter 7 is the credit implications can be very serious and it stay on your credit for ten years. This can have negative implications for getting future credit and even getting a job, as many employers are now running credit checks on applicants. Eliminating debt through Chapter 7 bankruptcy is the most popular form of bankruptcy, but one of its downsides is it fails to eliminate many types of debts, such as taxes, student loans, and debts where the creditor can prove you never intended to pay it back in full. The pro of filing Chapter 7 is that you can eliminate your debts almost immediately. This can stop any creditor collection efforts including wage garnishments and eliminate most liens on your property.Pros and Cons of Filing Chapter 13 Bankruptcy
The biggest con of filing Chapter 13 stems from the fact that you have to pay off the debt from your disposable income for three to five years. This is a difficult feat because what the court deems "necessary expenses" is very strict, and if you miss one payment you can be deemed in contempt of the court. This is one of the main reasons why just 33% of Chapter 13 plans are ever completed. On top of this, Chapter 13 also has a negative impact for seven years. This impact is not as negative as a Chapter 7 but it will still be very difficult to get credit as a result of filing Chapter 13. The biggest advantage of filing Chapter 13 is you can pay off past due secured debts in your plan, which isn't possible in Chapter 7. This means you can stave off foreclosure or a repossession provided you can afford to keep up with the regular payments during the course of your Chapter 13. To learn more about the pros and cons of filing bankruptcy, submit a form today and speak with a consultant about your debt relief options.