It’s not fun to be in debt. The worst part is that after you’ve reached the tipping point, things keep spiraling out of control. You are not alone if you have considered filing for bankruptcy. The current status of the economy has prompted an increasing number of people to declare bankruptcy. These are diligent people who wanted to pay off their obligations but were unable to due to circumstances beyond their control. You should be aware of the advantages and disadvantages of declaring bankruptcy before making a decision.
1. If you are in debt and the majority of what you owe is in credit card debt, bankruptcy may be able to remove or reduce the amount you pay. But, it will not end all types of debt (such as past child support or college loans), so you should think about what you owe.
2. Once your creditors are told that you have filed for bankruptcy, they are not allowed to contact you. They must either deal with the court or your lawyer. You lose control over how (or even if) your creditors get paid, so there’s no incentive for them to call you in the first place. One of the benefits of declaring bankruptcy is that you will no longer be plagued by a constant barrage of phone calls.
3. A clean financial slate is a strong reason to declare bankruptcy. It will allow you to start over and do things from this point forward. This fresh start applies to your credit report as well (sort of). The debts that are covered by the bankruptcy will be discharged, however…
4. One of the most significant disadvantages of bankruptcy is that it will remain on your credit report for ten years. While you won’t be shown as owing money to the creditors who were paid off, they can note that you didn’t repay them according to the terms of the agreement.
5. It’s a pain. Before you can file for bankruptcy, you must clear many hurdles under the new rules. You’ll have to supply a lot of financial information, and some types of bankruptcy need you to meet certain income requirements. As part of the process, you may be required to attend credit counseling.
6. Many people are unaware that becoming bankrupt can be stressful. As a result, many marriages have come to an end. People can also become depressed after declaring bankruptcy. Then there are individuals who have low self-esteem because they are ashamed of not being able to keep their word and repay what they owe. You may laugh at these things, but they are a real concern for many people and should be taken into account when considering bankruptcy.