Deciding to File Bankruptcy is More Difficult Than How to File 

Deciding to file for bankruptcy is tough.  It doesn’t have to be the last option.  Bankruptcy is strategic, and there are alternatives to bankruptcy.  Don’t feel trapped.  Get the facts.

Pros and Cons of Filing Bankruptcy

Should I File Bankruptcy

Are you struggling to make ends meet each month? Do you run out of money before you pay your bills? If so, you may want to consider filing a Chapter 7 or Chapter 13 bankruptcy petition. Even though bankruptcy might be a terrifying thought for you, filing a bankruptcy case might be the best way for you to get out of debt while protecting your property and future income for you and your family.

However, filing bankruptcy is a serious matter. You should not enter bankruptcy without considering all options, including the pros and cons of filing bankruptcy. Before taking any action to resolve a debt problem, we urge you to consult with our Prescott bankruptcy lawyers. We can analyze your financial situation to provide experienced legal advice you can trust.

Below are several benefits and disadvantages of filing for bankruptcy relief. Because each situation is different, some of these pros and cons may not apply in your situation. Take advantage of our free bankruptcy consultation to learn more about how filing bankruptcy can help you eliminate debts.

Benefits of Filing for Bankruptcy Relief

Some of the pros of filing a Chapter 7 or Chapter 13 case include:

  • Stop the stress of debt collection.

    Debt collectors and creditors can be extremely aggressive when attempting to collect a debt. You can stop the letters, phone calls, and threats by filing a bankruptcy. The automatic stay provided by the Bankruptcy Code applies in both Chapter 7 and Chapter 13 cases.

  • Avoid certain legal proceedings.

    When you file for bankruptcy relief, you can stop a foreclosure, garnishment, repossession, or collection lawsuit. In most cases, you can discharge the debt that is the subject of the proceeding.

  • Save your home and car.

    If you file a Chapter 13 bankruptcy, you can keep your car and home by repaying the past due payments through a bankruptcy plan.

  • Get rid of unsecured debts.

    Most general unsecured debts are dischargeable in bankruptcy. Medical bills, personal loans, credit card debt, and old utility bills are some of the debts you can discharge. In a Chapter 7 case, you can get rid of these debts within four to six months without paying any money toward the debt.

  • Avoid jail for past due domestic support obligations.

    A bankruptcy will not discharge past due child support or alimony payments. However, you may avoid jail for non-payment by filing a Chapter 13 case and pay the past due payments through your repayment plan. You must resume normal payments and remain current on those payments throughout the bankruptcy.

  • Learn money management skills.

    As part of the bankruptcy process, you must complete a credit counseling course and a debtor education course. Instead of rushing through each course, make notes of the tips and suggestions for wise money management. You can use the information from the bankruptcy courses to learn how to budget your money and use credit wisely.

  • Get rid of medical debt.

    Even if you have health insurance, an unexpected illness or accident can result in hundreds of thousands of dollars in medical debt. A bankruptcy filing can eliminate this debt in addition to other debts so that you can move past this challenging time in your life.

  • Get a fresh start.

    We all need a helping hand sometimes to get back on our feet after a monetary crisis. Bankruptcy gives you the fresh start you need, free from debt, to recover and rebuild after a divorce, medical emergency, a period of unemployment, loss of a spouse, failure of a business venture, or other crisis.

Disadvantages of Filing Bankruptcy

Some of the cons of filing a Chapter 7 or Chapter 13 case include:

  • Your credit rating could suffer.

    Filing for bankruptcy relief will usually cause a decrease in your credit score.  However, the decrease is temporary, and you can improve your credit score after bankruptcy. In many cases, debtors see an increase in their score within a year after completing the bankruptcy. Filing a bankruptcy petition is usually a better way to improve credit ratings compared to ignoring the debt problem.

  • You could lose some property.

    Many people fear losing property when they file a bankruptcy case, especially a Chapter 7 case. However, most Chapter 7 cases filed in Arizona are no-asset cases. You keep all your property while getting rid of most, if not all, debt. If you do have a piece of property that is not protected by bankruptcy exemptions, you can consider a Chapter 13 case to protect the property while getting rid of debt.

  • Filing bankruptcy is not free.

    When you file a Chapter 7 or a Chapter 13 bankruptcy, you incur expenses, including the filing fee, attorney fee, and fees for the bankruptcy courses. However, the amount you pay for these fees is usually small compared to the amount of money you can discharge in bankruptcy.

  • Not all debts are subject to discharge.

    Student loans, spousal support, child support, most taxes, restitution, and debts owed to the government are not eligible for discharge. However, you can repay these debts through a Chapter 13 repayment plan. If you file a Chapter 7 case, getting rid of all other debt allows you to focus on repaying these debts without the burden of other debts.

Are You Ready to Get Out of Debt?

Some people view bankruptcy as a negative event. However, filing for bankruptcy relief can be a positive step with many benefits. By eliminating your debts, you can move forward unburdened by debts you cannot afford to pay. You can begin saving money for your future and your retirement.

To learn more about how filing bankruptcy can help you, call our Prescott bankruptcy lawyer at 928-277-4304 to request a free bankruptcy consultation. You may also reach our Prescott bankruptcy law firm by using the contact form below.