The bankruptcy process is a much-debated topic. Bankruptcy offers debt relief for nearly all parties involved in the process.
With the filing, you will be legally able to give up any assets that are not protected by law, meaning the creditor cannot ask for anything more in terms of your obligation to pay them. This includes retirement accounts, a home and free from liability on any future debts incurred after filing. Along with this comes the time-consuming and financially costly bankruptcy court process. In addition to the said benefits of declaring bankruptcy, there is also a downside to the process.
Declaring bankruptcy is considered a second mortgage. This means you will be paying for the privilege of the bankruptcy court after your discharge is granted. According to the U. S. Federal Government, a majority of those who file bankruptcy facing debts with their creditors have to pay more than they expected in interest. The value of one’s property is often compromised in bankruptcy because the debt must be paid in full before the debtor can receive any money back on it. In some situations, if you are not able to pay anything back after your discharge, you will be responsible for paying for the cost-of-living expenses that you incurred during your bankruptcy.
Advantages and Disadvantages of Bankruptcy:
Bankruptcy is a relatively easy process to file for. It is often a matter of filling out the forms, showing proof of the debt and stating why one wishes to file for bankruptcy. There is no need for an attorney, though there are those who recommend filing through one. There are no court costs or filing fees associated with bankruptcy. This can save you lots of money from having to pay lawyer fees to file your case through the court system. A major advantage of bankruptcy is that you can have your debts discharged, meaning, in most cases, your creditor cannot come back to you for the remaining payment. This means that if you file for bankruptcy and are released from payment of your debt, you do not have to worry about being hounded by creditors who are trying to get some money out of you.
A major disadvantage is what happens after the discharge date. Having a negative on your credit report can be difficult to deal with, but there are ways in which this can be mitigated. When a debtor files for bankruptcy, there are debts that are not forgiven by the law and will still show up on your credit report. This includes taxes and child support payments. You can get into trouble for missing those payments, even if you technically don’t have to pay the creditors anything but the taxes owed. Another disadvantage is that your credit rating after bankruptcy might be worse than it was before you filed for bankruptcy.
What Are the Advantages and the Benefits of Filing for Bankruptcy?
There are many advantages and benefits to filing for bankruptcy. If you are unable to pay off your debts, bankruptcy might be your only way out. First, you get protection from creditors once bankruptcy is granted. Second, in most cases, all of your debts will be wiped away once the case is closed. This can help reduce the stress that comes with having tons of bills that need to be paid and not enough money to do it with. In addition, if you are a homeowner and have secured debts, you could be looking at foreclosure if you miss payments. This is another benefit of declaring bankruptcy. With the filing and discharge of your case, your creditor should stop trying to collect your debts.
What Are the Disadvantages and the Drawbacks of Filing for Bankruptcy?
While bankruptcy has many advantages, there are some disadvantages to this as well. When you file for bankruptcy protection, your debts will be wiped away from your credit report. This can make it difficult to get a loan or even an apartment lease after the case is closed out. Sometimes creditors will loan money to people on an agreement that they will not be able to have their debts discharged by filing for bankruptcy. It is rare for creditors to do this, but it can happen. In addition, if you have equity in your home and wish to keep the home, you will have to pay for the bankruptcy court fees in a lump sum along with the final debt that you are required to pay.
What Are Some Common Bankruptcy Legal Issues?
There are many legal issues that can come up in the bankruptcy field. The biggest issue is when a creditor forgives part of a debt and then tries to move it to a different part of the loan or claims that it never was forgiven. It is important to always get proof that you have paid off a debt completely, and if you don’t get proof, then you could be liable for paying back what you were discharged from. Another common problem is when people decide to stop paying debts without going through the proper channels. If you decide not to pay the debt and notify your creditor that you won’t be making payments, there is no guarantee that this is not going to affect your credit rating. Creditors have the right to sue for payment in many cases, and in some situations, if you are late on your payments for two years, creditors will auction off your assets and start lining up against them.
Bankruptcy is a process that can give you a fresh start and, in many cases, allow you to be able to get loans for new investment properties, re-establish your credit and even help start a business. It is important to understand the advantages, the disadvantages and all of your legal options before you decide to file for bankruptcy. This can save you from making mistakes that could negatively affect your ability to pay off creditors in the future and help establish your financial life again.