People who are under a huge amount of debt beyond their reasonable ability to repay it can recover from it by filing for bankruptcy and start their life afresh. But it’s not the perfect solution for your debt problems. Filing for it can have some effects on your ability to borrow loans in the future. You need to consider all your options before filing for it. You can consult a bankruptcy attorney in Boulder to help you make your decision and navigate through the legal process. You also need to consider all the pros and cons of doing so which include the following:
Pros Of Filing Bankruptcy
Protects You From Harassment
Sometimes, collection agencies may turn aggressive threaten lawsuits, foreclosures, etc. The bankruptcy petition puts an automatic stay that prevents collectors from taking actions for collections such as repossessions, sending notices, wage garnishments, utility shutoffs, etc.
Debts Settled For A Lesser Amount
Your creditors have to agree with the amount of repayment that’s determined in your case which is less than the original debt. In some cases, the debt may be cleared completely. The court determines the amount based on your financial situation and the ability to repay the debt. Once the creditor agrees to the amount, they cannot change it later.
Possible To Not Lose Possessions
If you file your case under Chapter 13, you can keep your unprotected property while repaying the debt over 3 to five years. The amount you have to repay depends upon your non-exempt property’s value. In case you file it under Chapter 7, your residence and vehicle are exempt from liquidation so that you don’t have to restart your life from scratch. Consult your bankruptcy attorney in Boulder to know which plan is suitable for you.
Maintain Lifestyle
The petition prevents creditors from liquidating your home, meaning you need not start from scratch. Moreover, your employer cannot fire you from the job due to it and creditors can’t garnish your wages, so you can maintain some semblance of normalcy. However, this benefit may not apply to a rented apartment.
Cons Of Filing Bankruptcy
Not All Debts Can Be Cleared
You will still be liable to repay some debts like a federal student loan, state taxes, fines, child support, alimony, debt incurred through fraud, court order, etc. However, they can be controlled to some extent like rewiring how much gets repaid for three to five years.
May Lose Some Possessions
If you file under Chapter 7, some of your possessions like additional homes and lands may be liquidated to repay a portion of the debt as per the court’s discretion. This excludes your primary residence and your vehicle so that you don’t have to start from scratch. You need to give up your credit card when filing a bankruptcy petition so you may have trouble hiring many services where you require it.
Credit History Spoiled
It creates a black mark on your credit history. It reduces your credit points by a huge amount depending on your debt and stays on your credit report for seven to ten years. This makes it difficult for you to apply for loans, credit cards or other types of credits. Any loans you secure may come with high-interest rates. However, it’s not the end. You can recover your credit score by improving your borrowing and lending habits.
Cosigner May Still Be Liable
When you are adjudged bankrupt, your cosigners and guarantors are not exempt from the debt. So, creditors may approach them to repay the debt. This doesn’t always happen but it’s best to notify cosigners and guarantors before filing so that they can prepare themselves.
These are the basic pros and cons of filing for bankruptcy. Once you are adjudged bankrupt, you can restart your life afresh despite the drawbacks. However, you need to plan your finances carefully so that you don’t spend more than your capacity to repay.
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