In these uncertain times, many Americans are looking for answers on how to manage their finances and get relief from the mounting debt that may be holding them back. What many do not realize is that there is no easy or quick fix to recapturing your financial freedom. Bankruptcy is a popular option for those experiencing crushing debt. Still, it is important to recognize that while bankruptcy may be the best option for your situation, there are some downsides to availing yourself of this protection. Let’s explore the pros and cons of bankruptcy including what you should do if you are facing serious financial problems.

Pros Of Bankruptcy

When most people think of bankruptcy, they tend to point to the elimination or discharge of unsecured debt. While it is true that some forms of bankruptcy may cause the elimination of eligible debt, that is not the only benefit. Bankruptcy at its core is a restructuring of finances. What this means is that bankruptcy gives debtors a chance at retaking control of their finances. The ultimate goal of bankruptcy is to give you a fresh financial start through resolving all or some of your current obligations. For those who have income, Chapter 13 bankruptcy allows you to retain possession of assets while entering into a repayment plan with your outstanding creditors. This enables you to honor your obligations while also being able to hold onto your assets as you are rebuilding your credit.

Cons Of Bankruptcy

Bankruptcy is neither all bad nor all good. The most glaring downside of bankruptcy is that it will significantly impact your credit score. Bankruptcy filers can expect at a minimum a 200 point reduction in their credit score. Chapter 7 bankruptcy, where some debt may be eliminated altogether, typically does more damage than Chapter 13 in which debt is repaid through a monthly payment plan.

Both forms of bankruptcy will continue to affect your credit score for at least seven years. What this ultimately means is that your chances of getting a loan or establishing a line of credit will be greatly reduced for a number of years while you work to rebuild your credit worthiness.

Depending on the type of bankruptcy filed, another potentially devastating effect is the loss or liquidation of assets. In Chapter 7, the bankruptcy court may require a sale of a home or other asset in order to satisfy outstanding obligations. While the great majority of filers do not experience a liquidation of assets, it is not outside of the realm of possibility. Those without significant income are at a greater risk of liquidation.

Getting Help From A Florida Bankruptcy Attorney

If you are considering bankruptcy and would like more information on how it will affect your current and future financial health, The Bankruptcy Team, PLLC is here to help. Our experienced bankruptcy attorneys are devoted to assisting clients resolve financial dilemmas through bankruptcy, foreclosure or other legal avenues so that they can get back on their feet. To consult with The Bankruptcy Team, PLLC, call or contact us today.