Pros and Cons of Bankruptcy

By: Want To Know It

Here are some of the pros and cons of bankruptcy. Some of these are specific to certain types of bankruptcy. I have given the relevant United States law where applicable.

Pros (Advantages):

Your creditors will have to deal with your trustee, and are not allowed to keep coming after you (cutting out the threatening letters and phone calls)
Can discharge any amount of debt (only by filing Chapter 7 bankruptcy in the United States)
You can keep your assets if you have a stable income source (under Chapter 13 of the Bankruptcy Code). But, obviously, you still have to pay all your debts back over a longer period of time
Most cases are dealt with relatively quickly (within 6 months)
Pensions and benefits remain untouched
Wages and property you get after filing for bankruptcy are allowed to be kept
A great option if you are in serious debt and see no way of getting out of it
Most of your debts will be cleared
Most people who file for bankruptcy have very few possessions (often only an old car and some clothes) which are usually exempted from being sold by your trustee (although different local laws will apply in each jurisdiction).

Cons (Disadvantages):

When filing Chapter 7 bankruptcy, some of your property (such as your home) will be sold by the trustee
Not all debts are discharged. These include past child support, alimony (spousal maintenance), student loans, income taxes and debts obtained by fraud (writing bad checks, for instance).
Ruins your credit rating. People who have filed for bankruptcy say it can take many years before banks and other financial institutions will approve them for credit cards and loans. Bankruptcy remains on your record for 10 years in the United States.
Hiring bankruptcy lawyers can be very expensive
You lose control of your money and property
You can no longer manage or direct a company, unless you get court approval
Can be embarrassing
Chapter 7 bankruptcy can only be filed once every 6 years
Withdrawing a bankruptcy claim can be extremely difficult
If you do have lots of debts and can barely afford to pay them, debt consolidation is probably the better option

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