Pros And Cons Of Declaring Bankruptcy
Many people who have the option of declaring bankruptcy are unsure what the consequences would be. Here is a look at some of the things that will happen after bankruptcy.
Con: You Will Lose Credit Cards
When you declare bankruptcy, you will lose your current credit cards. It may be difficult for you to reapply for credit cards right after your bankruptcy.
Pro: It May Help You Limit Spending
Losing credit cards may help you limit your spending. If you do need to apply for a credit card in order to start rebuilding your credit score, then you could consider a department credit card or another source with limited spending options. Once you declare bankruptcy, your financial adviser will help you to cut out unnecessary expenses and create a conservative budget.
Con: It Will Appear on Your Credit
Your bankruptcy will appear on your credit for up to ten years. Some credit reporting companies will take the bankruptcy off after seven years.
Pro: Rebuild Your Credit
At the same time, if you are deep in debt, having a bankruptcy on your file can be a better outcome than struggling with debt payments for decades to come. This way, you can start clean and work on building a good credit history going forward. You'll be wiped clean of debts that were unmanageable before your bankruptcy.
Con: You May Lose Some Possessions
Some luxury possessions may be repossessed during a bankruptcy. Check with a financial counselor to see which possessions you could lose; it depends on the type of bankruptcy you file for as well as your current assets. This won't include the essentials, such as your home and your main transportation vehicle.
Pro: Eliminate Debt and Begin to Accumulate Net Worth
By eliminating your debt, you can begin to accumulate assets and luxury items while also building a positive net worth for yourself. Some may see it as putting first things first; you may need to lose some possessions to go towards what you owe, but in the end, you will be in a strong financial place after the bankruptcy.
Pro: Different Options for Different People
One useful thing about bankruptcy is that there are different types to choose from. For instance, a Chapter 7 bankruptcy allows you to liquidate your assets to pay off debts, and then your remaining balances are canceled. A Chapter 13 bankruptcy helps you to partially repay your debts over several years while discharging the balance. A financial counselor can help you decide which route is best for you so that you can set your finances on the right track.
To learn more, contact a company like Vine & Williams Bankruptcy.
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