Filing for bankruptcy protection is considered a statement on your ability to repay your debt to your creditors. The fact that you sought and received bankruptcy protection will remain on your credit record for as long as 10 years. Additional factors regarding what is the downside of filing for bankruptcy can include:
- Filing for bankruptcy can negatively impact your immediate financial future.
- Obtaining credit after filing for bankruptcy could mean increased interest rates.
- Obtaining credit after filing for bankruptcy might require security deposits.
Filing for bankruptcy can give you the opportunity to start over and create a new financial reality for you and your family. However, the consequences of bankruptcy include many downsides that you should be aware of in order to make a fully informed decision.
In addition to these credit issues, certain bankruptcy filings will leave you with nondischargeable debt that must still be paid back. Nondischargeable debt can include property debt, tax debt, student loans, spousal support, child support, and criminal debt. While some bankruptcy chapters will allow you to manage many of these nondischargeable debts more readily, they will not be dismissed or discharged.
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Understand What Bankruptcy Means
Unexpected or lengthy illnesses, sudden or prolonged unemployment, and many other factors beyond your control can plunge you into debt that you might struggle to recover from. Insurmountable debt can make it impossible to meet your daily needs and can also lead to persistent pressure and anxiety.
When that happens, you can file for one of many chapters of bankruptcy, which will allow you to greatly decrease or completely dismiss overwhelming debt. Bankruptcy protection is a federal process and cannot be filed or tried in a state court. Federal bankruptcy laws will allow you to begin the credit and finance journey over with a new start.
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So what happens when you file for bankruptcy?
In addition to removing debt for consumers and businesses, bankruptcy also provides some measure of protection for creditors who might still recover a portion of the debt they are owed through restructured or reorganized debt payments. Your lawyer can help you choose the right bankruptcy chapter and filing to fit your specific financial needs.
There Are Options When Filing for Bankruptcy
If your financial circumstances do not allow you to pay all the debt you owe, bankruptcy can be a viable option for financial recovery. Before filing for bankruptcy, you might want to consider these other options for getting your finances back on track:
- Work directly with your creditors to reach a mutually beneficial debt settlement.
- Ask creditors for payment deferments, extensions, or reductions until you can get back on your feet.
- Carefully consider consolidating your debt into one loan with a single payment.
Consolidating debt comes with its own set of risks. A lawyer in your area can help you decide if these options will help relieve your current financial situation or if bankruptcy protection is a more viable option for you.
Understand the Advantages of Filing for Bankruptcy
You may have wondered, what is the downside of filing for bankruptcy? There are some advantages to filing for bankruptcy, too, however. When you need a fresh start to get out from under a heavy debt load, filing for bankruptcy could be just the answer you need. In addition to a new start, federal bankruptcy offers consumers, business owners, and corporations many benefits, including the following:
- Complete relief of all dischargeable debts with no further obligation to repay them.
- The ability to hold on to some personal property and assets like your home and vehicle.
- Relief from the constant pressure and invasive contact from debt collectors.
- Over time, your credit score can improve when discharged debts are removed from your credit history.
Your wages cannot be garnished by your creditors and your car cannot be repossessed while you are going through the bankruptcy process. Your lawyer can explain other advantages to filing bankruptcy that apply to your specific situation. Bankruptcy can give you the opportunity to create a new financial picture for yourself, your family, or your business.
Discover the Benefits of Filing for Bankruptcy
When you are seeking bankruptcy protection, our firm represents individuals and small business owners who want to file Chapters 7 and13 bankruptcy cases. We can help you navigate through the more complex filings of debt reorganization through Chapter 11 bankruptcy and with Chapter 12 bankruptcy for family farmers.
You might also be able to retain your assets even if you file for bankruptcy. If you are ready to file for bankruptcy protection and to start eliminating crippling debt, contact the team members at Farmer & Morris Law, PLLC by calling (828) 286-3866 today.