Filing bankruptcy and hiring a bankruptcy lawyer are the things that some people think especially when they already have exhausted all the possible ways of paying their debts, but fail in their attempt.
Bankruptcy laws are written to provide individuals whose finances have collapsed to the point of no redemption, a second chance to start all over again, although this will be recorded in their credit score and affect their purchasing power as well as their reputation. Also, not all people are granted this chance, although all people who have the qualifications are granted to be free from their debts instantaneously.
In this article, we will share with you the advantages as well as the disadvantages of filing a bankruptcy.
1. Suspends all credits and stops creditors from bugging you.
Once a person files for bankruptcy, the court automatically issues this stay that protects the debtor from any debt collection until the case is complete or lifted. This means that the court will prevent wage garnishments, lawsuits on debts, calls, and letters from debt collectors, and property repossession. This just temporarily stops the debt activity until the case is complete.
2.Discharges all the debts
When the court finally grants this chance, the person will be free from all debts and will never be legally required to pay them anymore. These debts include personal loans, medical and utility bills, and even credit card debts.
3.May allow maintaining property ownership
This exception plays an important role in chapter 7 and 13 bankrupcies that protect the asset and allows the person to have a legal hold of his/her property.
4.Impacts on credit score
When a person has many debts and these accumulate for each passing month, the person experiences a consistent degradation of his/her credit score. However, when the person applies and granted bankruptcy, the person is freed from all debts, therefore creating some effects on his/her credit score. But it is also important to take note that the bankruptcy record will be shown to the owner’s credit score seven to ten years.
1.The immediate impact on credit scores
As mentioned, the bankruptcy record will be shown up to 10 years depending on the type of bankruptcy filed and granted.
2.Loss of credit cards
Several credit card companies will cancel any cards that a person holds when she/he begins to file for bankruptcy.
3. Difficulty to obtain loan or mortgage
Because there is a record for this bankruptcy, the person will have difficulty in obtaining loans and mortgages again.
Some of the landlords as well as employers may ask about this and will negatively affect both parties: you and them
Even when a person is granted bankruptcy, there are still debts that can’t be discharged which include child support, criminal fines, student loans, or any debts that were acquired through fraudulent acts.
Generally, there is actually overlap when it comes to advantages and disadvantages of filing and being granted bankruptcy, and there are several factors that contribute to whether or not, filing bankruptcy will help a person for better or worse. It is important to reassess and consider all angles before deciding.