In order to relieve you from debts and help you start afresh financially, federal laws have a provision allowing individuals and businesses to file for bankruptcy.
When you file for bankruptcy, you are basically stating that you are unable to clear your debts and that you would like to forge into a new future without having to deal with creditors’ pressures.
Factors to Consider Before Filing Bankruptcy
Individuals are always advised to pay their debts rather than file bankruptcy. Most individuals report regret years after they have filed for bankruptcy. The act could negatively affect both your personal and emotional life.
As you think about making this decision, it is always recommended to bear in mind a number of options. These include negotiating with the creditors, seeking credit counseling, and whether there are some medical bills not covered by insurance.
Most creditors would rather settle the debt with you instead of it being discharged in bankruptcy. If you are a few months late on your payment, you can easily negotiate on the debt. However, do not purposely fall behind in payments just because you can negotiate with the creditor. Furthermore, getting a credit counselor will be beneficial to you whether you have fully decided to file for bankruptcy or you are still skeptical on the matter.
The law requires you to consult with a credit counselor six months prior to filing for bankruptcy. During the consultation, you may be given some helpful insight that can change your perception. However, remember that credit counselors do not hold any powers. They just know how to tell you the right words.
What are the pros of filing for bankruptcy?
An ‘automatic stay’ is the most immediate benefit of filing for bankruptcy. This sends a notice to the creditors that they should stop attempting to collect money from you. With the stay, it becomes illegal for creditors to call you, file lawsuits, send collection letters, seize your assets or garnish your wages. There are a few exceptional cases, especially those related to child support and collection of alimony.
Individuals who successfully file for bankruptcy will have the court issuing a specific amount of debt discharge. This means that they won’t have to repay them. Even as you benefit from the advantages of filing for bankruptcy, they are disadvantages as well.
What are the cons of filing for bankruptcy?
Bankruptcy does not eliminate your debts. It only helps you with them. Student loans, alimony and child support remain active. As a result of filing for bankruptcy, you lose your non-exempt property such as stocks, cash, cars, property and bonds.
Your credit history gets stained for more than 10 years, making it significantly tough to secure loans in the future.
Before you file for bankruptcy, look at the pros and cons to decide whether the decision suits you. An experienced lawyer should help you get the process done smoothly. If you’re in the Brooklyn area, Michael F. Kanzer & Associates is right for you. We can walk you through Bankruptcy process. Contact us today for a free consultation.