Weighing the Outcomes of Bankruptcy
Bankruptcy may be a legal action , but it comes with a lot of emotional baggage. Many people feel that filing for bankruptcy is an embarrassment or a poor reflection on their ability to earn or manage money. The truth is that there are many factors that can lead to the need for a bankruptcy filing: that’s why there are nearly 800,000 personal bankruptcies filed each year. If you are weighing the pros and cons of bankruptcy, here are some of the outcomes for you to consider:
Bad Outcomes:
- Rebuilding your credit will be a challenge. You’ll lose all of the credit cards you held before your filing and your credit rating will drop, which will make it harder to get new ones.
- Rates for loans and credit cards will be higher for at least two years because of your lowered credit score.
- Your bankruptcy filing will become a matter of public record.
- Filing for bankruptcy costs money that you probably don’t have readily available. The costs are generally between $300 and $400 for the filing itself, plus you will need to pay your attorney if you choose to have one represent you. You will also be required to pay for mandatory credit counseling.
Good Outcomes:
- Your debt will disappear. Not only will you no longer be responsible for paying any of the bills that your bankruptcy discharged, but the bill collectors who have been tormenting you will be required by law to stop calling. For many people who file for bankruptcy, that alone makes the process worthwhile.
- A chance to build a good credit rating. When you file for bankruptcy and erase your debts, you have the chance to start building a better credit score. Even though you’re starting off with a bankruptcy on the books, you can put in the hard work to rebuild your credit more easily without having to worry about existing debts.
- Getting rid of credit cards means you can’t get yourself into any more debt. Most people who file for bankruptcy have to cut up their credit cards and do without them. Getting into the habit of using cash will teach you how to budget and keep you from spending more money than you have.
- It puts an end to borrowing against your savings and others. One of the things people do right before they file for bankruptcy is to borrow from their savings to keep themselves afloat. When you finally make the decision to file, you’ll be able to stop pulling money out of your nest egg and borrowing from family and friends.
All in all, despite the negative side of bankruptcy, most people are glad that they choose to file. For more information on how filing for bankruptcy would work for you, contact us today to set up a time to meet with one of our experienced attorneys.
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