The Pros and Cons Of Bankruptcy
Bankruptcy may be seen as a quick fix solution to financial problems. However, the effects of bankruptcy are long term and can impair your ability to obtain a job, house, and any type of credit. It is important to weigh the pros and the cons of bankruptcy before making a major decision.
Admittedly, bankruptcy comes with a number of benefits. First and foremost it annihilates most of your debt. It can aid you with missed debt payments, defaults, repossessions and lawsuits. If you have horrible credit, it can get you started on rehabilitation.
Bankruptcy will stop the phone calls from creditors, collections letters, repossessions, declined charge authorizations, cancelled credit cards, and lawsuits. You also can keep your car if you keep up on the payment; bankruptcy will also allow you to hold on to your home if you remain current on the payments.
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Bankruptcy lets you to exit foreclosure and make monthly payments on existing amounts. Lastly, it stops creditors from making a claim after it is filed, even if your financial situation changes.
On the flip side, bankruptcy law offers a “fresh start” but only every six years in many cases. Bankruptcy will be on your credit report for ten years and severely hurts your credit rating. In addition, filing bankruptcy may require a wait of two years before it is possible to buy a home. Some lenders allow for home loans after one year though.
Bankruptcy does not deal with most tax debt. It does not clear away student loan debt. It is required that you give up your credit cards. It may cause you to lose some of your possessions, and unfortunately bankruptcy carries a stigma that can be embarrassing.
If you are not sure whether to file bankruptcy or not, call your collection agency to see what type of repayment plan they can work out with you. Even though bankruptcy is an option, in most cases it should be seen as a last resort.
Mallory Megan is employed by a debt collection company. Also she composes stories on business, finance, consumer spending and collection agencies.
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