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Pros and Cons of Declaring Bankruptcy

Pros and Cons of Declaring BankruptcyObviously, no one wants it to come to this. If you are even thinking about declaring bankruptcy, you are already in a difficult financial position.

While it would be easy to feel sorry for yourself at this point, those feelings aren’t going to do anything to get your life back on track. Instead, the best thing you can do is to simply make the best possible choice moving forward.

Should you declare bankruptcy, or should you keep working to get out from under your debts? There are pros and cons involved with each option.

The information below should help you take a rational approach to your next move.

Pro: Wipe Away Debt

This is the main reason that you will consider filing for bankruptcy. Many of your debts will be forgiven when you go through a successful bankruptcy process, meaning you won’t have to find a way to pay them back.

For the individual who is too far in debt to ever think about getting out, bankruptcy may offer a future where there wasn’t one previously.

Con: Long-Term Credit Damage

Your credit history is going to be severely damaged by the presence of a bankruptcy filing. This is a long-lasting effect, and you will very likely have significant trouble getting a loan anytime soon. When you are able to get a loan, you can expect to pay much higher rates than those with a clean track record in the area of credit.

This is why you should think carefully about filing bankruptcy and only proceed if you feel like it is your only viable option – the damage that will be done to your credit should not be taken for granted.

Pro: Stop the Calls

If you are way behind on debt payments, you no doubt have been receiving plenty of phone calls from creditors demanding money. Those calls can be stressful, to say the least.

Fortunately, filing for bankruptcy can put a stop to the constant harassment. Once an automatic stay has been issued by the court, it will no longer be legal for your creditors to contact you in search of a payment.

Con: Costs

Ironically, filing for bankruptcy is going to cost you even more money – which is money you don’t have, of course. There are a variety of fees related to the bankruptcy process, and they can add up in a hurry. Included in those costs are attorney fees, credit counseling fees, filing fees, and more.

As you are already struggling to pay your bills, it won’t feel good to add even more expenses onto your plate.

Pro: A Fresh Start

At the end of the day, this is really what bankruptcy is all about. If you have made a series of financial mistakes in your past, or if you have suffered a hardship which put your finances under stress, you may just be looking for a way to ‘start over’.

Bankruptcy isn’t exactly that, since your credit is going to be damaged, but you will at least have the chance to get your head above water.

 

Have you ever thought about filing bankruptcy? Why or why not?

 

Photo courtesy of: 1820796

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John Schmoll is a Dad, husband and veteran of the financial services industry. He's passionate about helping people learn from his mistakes so that they can live lives free from the shackles of debt and empowered to make their money work for them. You can check out his other sites: Frugal Rules, for ways to improve your financial literacy; and Sprout Wealth for tips on different ways to make more money. John has been featured on Forbes, Lifehacker, Yahoo Finance and US News & World Report and more. If you're wanting to grow your blog, check out my blog coaching services to see how I can help you take your site to the next level.

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