A business or an individual can go through financial instability. In certain circumstances, declaring bankruptcy is the best option. If you are going through any financial turmoil, you should first hold your breath and understand your financial situation before making any decision.
It’s essential to consult a skilled bankruptcy lawyer if you need professional advice. Lawyers of bankruptcy Birmingham AL suggest that one should understand his/her financial situation properly before filing bankruptcy. Although it can affect an individual’s finances in the future, it may be the best option for them. So, if you are unsure whether you should file for bankruptcy or not, weigh the pros and cons before making any decision.
Advantages of Filing for Bankruptcy
Filing bankruptcy is not always the right solution, but sometimes it makes sense. Here are some potential benefits of declaring bankruptcy.
1. Stay Against Creditors
Once you file for bankruptcy, all your debt collection activities will stay automatically. However, it doesn’t cancel your debts; it just suspends your debt collections. That means you will not receive any calls or notifications from your debt collectors, no property repossession, lawsuits for debts, etc.
If your creditors still collect a debt from you after the automatic stay by the court, your bankruptcy lawyer can disregard them. So, you should consult a lawyer if you want to declare bankruptcy.
2. Credit Score
Although filing bankruptcy can affect your credit score, however, it can worsen your credit history if you don’t pay your debts and even don’t declare bankruptcy. When you declare this, some creditors may improve your credit score once you get back to a normal financial situation.
3. Retain Ownership of Personal Assets
Another main advantage of declaring bankruptcy is, it retains your ownership of property. It’s applicable to both types of bankruptcy; chapter 7 and chapter 13. You can exempt an asset that means the creditor cannot seize your property. In some exemptions, you can save upto some dollars, while in some cases, you can save the entire value of an asset.
4. Dischargeable Debts
Finally, it can discharge or cancel out some debts such as personal loans, credit cards, medical utility bills, etc. However, you need professional legal advice before filing bankruptcy to know whether it will cancel your dischargeable debts.
Disadvantages of Filing for Bankruptcy
Although there are some benefits, you shouldn’t ignore the drawbacks of declaring bankruptcy. Understanding the disadvantages will help you make an informed decision.
1. Difficult Obtaining Loans
One of the major problems with declaring bankruptcy is that you will struggle to obtain loans in the future. For example, if you need finance for starting a business again after bankruptcy, chances are fewer that creditors will be willing to finance you. Maybe you need a cosigner to get loans after bankruptcy.
2. Impact on Your Credit History
The bankruptcy will remain on your credit history for long years. It will remain for ten years in case of Chapter 7 bankruptcy and seven years for Chapter 13 bankruptcy.
3. Doesn’t Dismiss All Your Debts
Although bankruptcy cancels some dischargeable debts, it doesn’t cancel all your debts. For instance, it will not cancel the non-dischargeable debts such as student loans, alimony, criminal fines, etc.
Now that you know about the advantages and disadvantages, you can make an informed decision. Still not sure what to do, here is what an expert lawyer from Bankruptcy Birmingham AL suggests:
Should You File for Bankruptcy?
Although declaring bankruptcy can impact your financial future, you should file for it in the following cases:
- You can’t pay your financial obligations.
- You are getting harassing debt collection calls and letters.
- Excessive debt that you cannot repay.
However, if you are still unsure, consult an experienced bankruptcy lawyer who can help you understand your situation and assist you accordingly.