Bankruptcy is an option for getting out of debt offered to citizens of the United States who are faced with a serious financial crisis. Although both Chapter 7 and Chapter 13 bankruptcy can be extremely beneficial, there are some negative aspects of this solution as well. Unfortunately, due to the high amount of fraud over the years that consisted of people filing and being approved for bankruptcy that should not have qualified, this government program for eliminating debt has been plagued by exaggerated horror stories.
We want to address a few downsides associated with filing for personal and business financial protection, followed by focusing on the top reasons why it makes perfect sense. One concern, when filing for Chapter 7 bankruptcy, the negative record of having gone through this process would remain on your credit report for seven years and when filing for Chapter 13, it would take ten years for it to be removed from the report. From a seller’s perspective, this reduces your creditworthiness and puts you in a high risk category.
Another downside to bankruptcy is the financial investment. For instance, you would be required to pay a filing fee, any cost connected with credit counseling, which is now mandatory under the new “Bankruptcy Abuse Prevention and Consumer Protection Act of 2005”, and any attorney fees if legal assistance for any part of the bankruptcy filing was needed. Depending on the type of bankruptcy and severity of debt, the total would run anywhere from $350 to $800. Although a few other things would be considered negative, these two are the main issues.
Filing for bankruptcy also offers a number of benefits, which is the reason people go through this process in the first place. If you are in a situation whereby you cannot meet your financial obligations, regardless of the reason why, based on a specific formula used for qualification, a credit counselor or bankruptcy attorney could tell you if you are a good candidate under the new 2005 bankruptcy laws. If you were, bankruptcy protection would provide the opportunity for a fresh start.
Additionally, even though the bankruptcy would stay on your credit report for up to ten years, often when creditors see that a person has had debt discharged through a bankruptcy, they are actually more willing to extend credit than prior to filing. The reason is that creditors know legally, the individual would not be able to file for bankruptcy again for a long time. Therefore, you could expect to receive several credit offers, especially from credit card companies. This would help in rebuilding credit but more than ever before, it would be critical that you be careful to avoid ending up in another financial mess.
Then as mentioned, another positive aspect of filing for personal and business bankruptcy protection is getting out of debt. Even if you were required to pay some creditors, the level of stress relief is tremendous. When people are constantly stressed with debt, marriages suffer, job quality and production is affected, health problems can arise, and everything in life becomes more serious and hopeless. Being able to get out from under this debt is not a miracle cure but it certainly changes the dynamics of everyday life for the better.