Benefits of Bankruptcy: What the Pros and Cons Are
Friday, January 29, 2016, 6:00 PM | Leave Comment
If you are struggling to pay your bills or want to avoid losing your home to foreclosure, it may be in your best interest to file for bankruptcy. But this kind of move cannot be undertaken lightly, as it can have serious effects on your credit.
What else should you consider if you are looking into bankruptcy?
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You May Owe Nothing to Creditors
If you are eligible for Chapter 7 bankruptcy, you may be able to discharge unsecured debt without paying anything to creditors. In addition, you may be able to retain equity in your home as well as any money in a retirement account such an IRA or 401k.
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You May Owe Money to an Attorney
While you may owe nothing to creditors, you may need to pay an attorney to help you with your case. In some cases, you may pay a flat fee to file that may or may not be negotiated ahead of time. Attorney’s fees may be in addition to other filing fees imposed by law.
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You May Keep Some or All of Your Property
You may be able to keep a house or car if you file for Chapter 13 bankruptcy. States also exempt certain property such as clothing and other small items from being taken. Furthermore, if an item has little or no monetary value, it will not be liquidated as part of the bankruptcy process.
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Bankruptcy Stays on Your Credit Report For Years
When you file for Chapter 7 bankruptcy, it will stay on your credit report for 10 years. If you file for Chapter 13 bankruptcy, it may stay on your credit report for up to seven years. However, the good news is that lenders and others may disregard the bankruptcy if you pay your debts on time for a period of 12 to 36 months.
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Your Options May Be Limited
If you have filed for Chapter 7 bankruptcy in the past eight years, you are not eligible to do so again. You may also be limited to Chapter 13 bankruptcy if you make too much money or have other assets that can be liquidated to pay your debts without resorting to bankruptcy.
As Wiesner & Frackowiak, LC bankruptcy attorneys in Kansas City remind, filing for bankruptcy can be an effective form of debt relief. However, it can also harm your credit and potential for future loans. You must weigh both the pros and the cons before determining that filing is in your best interest today and in the future.
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