Let’s face it: today’s economy is tough. For some, it’s a rocky road. For others, it’s more of a sink-hole. If you’re in the latter group, you know how overwhelming debt can be. But, however trying your financial troubles are, there are always possible solutions, as long as you’re willing to step up to the plate and commit to some positive action. Those solutions may be as simple as creating a budget, or as serious as filing for bankruptcy. If you’re head over heels in debt and you just can’t see a way out, then bankruptcy may be your best option. Of course, whether or not to file bankruptcy is not an issue to be taken lightly. First consider these pros and cons of filing for bankruptcy:
No more calls from debt collectors. Anyone who has suffered financial woes knows how very disheartening collection calls can be, especially when you’re not in the position to settle the debt. As soon as you file for bankruptcy, the courts notify your creditors, and the calls stop.
Wipe the slate clean. When you file for bankruptcy, you only keep the debts you want to continue paying on. That means that you could be debt-free as soon as your bankruptcy is granted. There’s no better way to start from scratch than to be debt-free.
Your credit will be negatively affected. In addition to lowering your credit score, a bankruptcy stays on your credit for ten years. While that won’t stop you from rebuilding credit, it will definitely make establishing new credit more difficult. You may have to build alternate lines of credit and pay high interest rates just to get new, positive credit accounts on your record.
You can only file for bankruptcy every seven years. Of course, you don’t go into a bankruptcy with the intention of someday filing again. But accidents happen, and you need to know that once your slate is wiped clean with a bankruptcy, you will be stuck with every negative item that goes on it for at least seven years thereafter. Be sure when you file for bankruptcy that you are ready to commit to turning any bad spending habits around, or you could end up in a worse position than you started out in.
Once you weigh out the pros and cons of bankruptcy, you should be better able to decide if bankruptcy is right for your situation. If you are seriously considering filing for bankruptcy, be sure to thoroughly examine your finances and discuss your decision with an attorney before moving forward.
About the Author: Deborah Dera is a full-time writer and blogger with a passion for personal finance, credit repair, and bankruptcy. She is also a contributor at CreditLoan.com.