The Pros and Cons of Bankruptcy

When you find yourself in extreme financial difficulty and it seems you have no other recourse but to file for bankruptcy, you should carefully weigh the pros and cons of taking such action before you do so.

The decision to declare bankruptcy is no doubt an agonizing one because it is an admission of failure in being able to handle your finances. It will have a detrimental affect on your future finances and the relationship you have with lenders. At the same time, it can help to relieve some of the stress you have been experiencing over not having enough money to pay your bills.

Pros

• When you file for bankruptcy, you no longer have to deal with creditors or collection agencies harassing you for payment. This is because they are not legally allowed to do so once you file with the court. Your barrister will shield you from all the unpleasantness of dealing with foreclosures and repossessions because none of this can take place until the process of bankruptcy is complete.

• There will be a third party designated by the court to handle the administration of your debts if you do not have your own solicitor.

• In some cases, you will still be allowed to keep some of your possessions, such as your home and car, when you file for bankruptcy.

• You can get a start on rebuilding your credit rating even though bankruptcy shows up on your credit report and stays there for at least eleven years.

• With a bankruptcy order from the courts, creditors will accept less than the full amount of the balance on an account to consider it paid in full.

• Creditors are not allowed to change their minds once they give an amount for paying off the balance.

• Once the debts are paid, they are considered finished and creditors are not permitted to come back to you looking for more money.

Cons

• You have to give up all your credit cards and you will not be able to obtain any more for a long time. Therefore you do need to have money available to pay for incidentals, such as groceries, transportation and clothing.

• It will be next to impossible for you to get approval for a mortgage once you declare bankruptcy. This is also true of obtaining any type of unsecured loan. You may be able to get a secured loan, but you will be subject to a high rate of interest because you are a bad risk for repayment.

• Not all of your debts will be discharged by declaring bankruptcy. Student loans, for example, are exempt from this in many places, which means you will still have to make your regular payments on this loan.

• Your name will be published in the newspaper and will appear in court records.

• When you declare bankruptcy, you will be prohibited from holding public office.

• If you own a business, it will be closed and your employees will be out of work.

• All of your financial dealings are open to scrutiny and if there are any irregularities, you could possibly face criminal charges.