Is Filing Bankruptcy Bad?

Filing bankruptcy is a serious consideration with long term consequences. The best way to answer this question is to weigh up the information given in this article and then decide for yourself.

Is filing bankruptcy bad? It depends how you look at it. Not having debt collectors phoning you or knocking on your door chasing you for money may offer you relief from the stress that often comes with outstanding debts. That could be looked upon as a good thing.

Once you have filed for bankruptcy, your creditors are not allowed to harass you any longer. An automatic stay is established and your creditors have to deal with matters through the court system.

Another factor that can be looked upon as good is once the bankruptcy is finalised in the courts, all your debts up to the time you filed for bankruptcy are discharged, meaning that you are no longer liable to pay back your creditors any money owed to them. The exception here is alimony and child support, student loans and money owed for tax.

The creditors can no longer chase you for money once the bankruptcy is filed and they can’t make a claim for those debts on any future income you earn.

If it’s a Chapter 7 bankruptcy you are required to hand over all your assets to a trustee who then sells them and allocates the funds to your creditors. To answer the question “is filing bankruptcy bad?” this could be considered a bad thing.

If it’s a Chapter 13 bankruptcy, you don’t have to hand over your assets to be sold. Instead you come to an agreement with your creditors, the trustee and the Court to pay your debts from the income you are currently earning.

So you get to keep your assets, but your repayment plan must give your creditors at least what they would have received had your assets been sold under a Chapter 7 bankruptcy and it has to be approved by all parties involved.

One of the bad aspects of filing bankruptcy is that it will negatively affect your credit record, as a bankruptcy will stay on your credit report for up to 10 years. (7 years for a Chapter 13 and 10 years for a Chapter 7).

Having this on your credit report makes it harder to obtain personal loans, home loans or to even get credit card approval. That’s not to say that you will never get finance again, it just makes it more difficult and if you do manage to get finance, you will be charged a higher interest rate on any moneys borrowed.

So as you have read there are some valid reasons for filing a bankruptcy and then there are some negative consequences, so to answer the question, is filing bankruptcy bad, only you can decide by weighing up the pros and cons to your particular circumstances.

After giving it some careful consideration, if you do decide to file for bankruptcy, I highly recommend that you get a qualified bankruptcy attorney, who is well versed in bankruptcy laws and exemptions, to represent you.