Maybe you haven’t been disciplined on your spending habits. Perhaps you have fallen on bad luck after a flow of unforeseen expenses or you have unexpectedly lost income. Filing for bankruptcy may not be an ideal step in your life, but it may save you from a seemingly endless amount of debt.
Filing for personal bankruptcy won’t rescue you from all of your troubles, and it won’t ruin your life forever. Sometimes, the pros and cons can weigh out pretty evenly.
6 Pros of Filing for Bankruptcy
If bankruptcy really was the worst of the worst, there wouldn’t be so many advisors and lawyers trying to help your credit score get back to what it once was. Here are a few ways filing for bankruptcy can help:
1) You may see your credit score improve soon after filing. Bankruptcy details vary per person, but because you are relieved of paying back certain debts, your credit score won’t have those missed payments to measure against.
2) You may be able to obtain new lines of credit within 1 to 3 years. Though your interest rate will be significantly higher on new lines of credit after a bankruptcy, credit can become available if your financial plan is followed.
3) You may find a reason to discover new spending habits. If poor spending habits were the reason for falling into debt in the first place, bankruptcy could be a big wakeup call to get your financed in order.
4) A judge will issue an automatic stay, which bars creditors from collection attempts.
5) You won’t be able to be fired from a job solely for filing for bankruptcy.
6) Your home and car are usually protected from seizure.
6 Cons of Filing for Bankruptcy
Of course, there will be some disadvantages to bankruptcy. Just know that if you can get through the worst of it, your credit score may get back to what it once was in a shorter amount of time.
1) Filing can cause your credit score to fall. Bankruptcy isn’t just a clean slate to start from. Your credit score will likely fall significantly, though by how much is unique to each financial situation.
2) Your bankruptcy will be public for many years. Lenders will be able to see your bankruptcy for ten years (if you file for Chapter 7 bankruptcy) or seven years (if you file for Chapter 13 bankruptcy).
3) It can be difficult to get a mortgage. If you do not currently have a house or mortgage, it can take several years before obtaining a new mortgage.
4) You may lose some property if it’s defined in the bankruptcy agreement.
5) Bankruptcy does not exempt you from student loan debt.
6) You will still need to pay alimony and child support.
This article should not be taken as legal advice. If you’re considering bankruptcy or another legal option, you need to consult an attorney for guidance. If you’re in New Jersey and seeking legal assistance, we can help you.
About Our NJ Bankruptcy Attorneys
Brenner Spiller & Archer is a New Jersey law firm that is dedicated to helping families find relief from the burden of debt and other financial woes. For more than 35 years, our bankruptcy lawyers have provided effective guidance on all debt relief matters to clients throughout Central and South Jersey.