Considering Bankruptcy? Think About These Pros And Cons

10:18 a.m. July 19

Considering Bankruptcy? Think About These Pros And Cons

So you have the collection agent on the telephone, you owe more money than you can count and you think you have nowhere to turn. You may be considering bankruptcy as a quick fix solution to all of your financial woes. But keep in mind that while bankruptcy may cure some immediate problems, the effects of bankruptcy are long term. Having bankruptcy on your credit report can hinder your ability to get a job, a living environment, and any type of credit. So before you jump in to bankruptcy, it is crucial to weigh its pros and cons.

It is a fact that bankruptcy brings a large amount of benefits to the table. First of all, it absolves you of most of your debt. It has the capacity to aid you with missed debt payments, repossessions, lawsuits, and defaults. If you have really awful credit, bankruptcy could be the trigger that can jump start you on your way to rehabilitation.

Bankruptcy will put an end to the phone calls from creditors, repossessions, canceled credit cards, declined charge authorizations, the collections letters, and lawsuits. In addition, you have the ability to hold on to your car if you keep up with the payment, and you are also permitted to keep your home if you remain current on those payments as well. Also, bankruptcy will allow stop creditors from making a claim after you file for it, even if your financial situation changes.

However, bankruptcy is like a big red stamp on your financial history that says “DON’T GIVE ME MONEY!” It will remain on your credit report for ten years and has a severe, negative impact on your credit score. If you are thinking about buying a home after filing for bankruptcy, get ready to wait. It will most likely take you two years before you can purchase a house, although some lenders allow for home loans after one year.

In addition, bankruptcy won’t cure all of your financial problems. It does not help most tax debt situations, or student loan debt. Also, you will be forced to hand over your credit cards, and some of your possessions. Unfortunately, and maybe unfairly, declaring bankruptcy also sometimes carries a stigma that has the potential to be embarrassing. If you find yourself in a bind and are not certain whether you should file for bankruptcy or not, try calling your creditors up first to see if there is any type of repayment plan you can work out together. Even though bankruptcy is always an option, in most cases it should be viewed as a last resort.

Mallory Megan works for Rapid Recovery Solution and writes articles on national collection agencies.