Reaching the decision to declare bankruptcy usually isn’t easy. Many people still have a negative perception of bankruptcy, even though it can sometimes be the best way to start a clean slate financially. Even so, bankruptcy has far-reaching implications for your credit score, your debt and your current and future financial stability. It can have negative consequences, but it also has strong benefits.
When considering declaring bankruptcy, take some time to carefully weigh the pros and cons. What follows is a list of some of the most important advantages and disadvantages of bankruptcy:
- Most debt from taxes will not be discarded. If a significant part of your debt is from taxes, you may not be able to discharge it.
- Student loan debt is not forgiven during bankruptcy.
- All of your credit cards will be shut down.
- You may have to scale back your lifestyle and get rid of some possessions.
- Declaring bankruptcy now may make it harder to declare it later, if something worse happens down the road.
- Your name and the fact that you filed for bankruptcy will be a matter of public record.
- There are many negative perceptions surrounding bankruptcy.
- Bankruptcy can get rid of tax liabilities from more than three years ago.
- The sooner you declare bankruptcy, the sooner you can start rebuilding your credit.
- Chapter 7 or Chapter 13 bankruptcy can end aggressive collection action from lenders.
- You will not receive any more constant, endless phone calls from creditors.
- You will be able to keep most of your possessions.
- Declaring bankruptcy can help you face the reality of your financial situation.
- Bankruptcy offers a fresh start and helps you climb out of a difficult situation.