Brenner Spiller & Archer

Pros and Cons of Bankruptcy

While the term “bankruptcy” if often intimidating to many, it can be a very appropriate and clever financial move. There are different types of bankruptcy but the most common forms are Chapter 7 and 13. Both have their pros and cons:


  • A Clean Slate

Chapter 7 bankruptcy allows you to clear out most of your unsecured debt and financed personal property. Medical debts, credit cards, loans, and other forms of unsecured debt can all be eliminated allowing you a fresh start.

  • No More Harassment

If you’re in debt, odds are creditors have called you at all hours of the day, insisting you make your payments. Fortunately, bankruptcy puts a stop to all this thanks to protection of automatic stay. Automatic stay immediately goes into effect when you file for bankruptcy and stops most creditors from going after you. This can be an immense relief in an already difficult situation.


  • Poor Credit Rating

A bankruptcy can dramatically lower your credit score – it is the main counterpoint to having a fresh financial start. The bankruptcy can stay on your credit report for at least seven years, capping out at 10 years. It’s certainly not impossible to achieve a proper credit rating again, but it will take time.

  • You May Not Qualify

Not everyone that wants to file for bankruptcy will necessarily qualify to do so. In order to be eligible for Chapter 7 bankruptcy, debtors must successfully pass something known as the means test. The means test takes various factors into consideration to determine your eligibility, such as your income and the amount of debt you’re in. If you find out that you don’t qualify for a Chapter 7 bankruptcy, you may need to explore other options.

If you are weighing your financial options and looking for way to cope with increasing debt, contact an experienced bankruptcy lawyer who can help.