Bankruptcy is a legal process allowing individuals or businesses unable to pay their debts to seek relief from some or all of their financial obligations. While it may provide relief to those struggling with overwhelming debt, the decision to file for bankruptcy should not be taken lightly.
There are several advantages and disadvantages to consider. If you struggle financially and are thinking of filing for bankruptcy, our attorney at the Law Offices of Melanie Tavare can help. Reach out to our Bay Area bankruptcy attorney to discuss your case and determine how you can benefit from filing for bankruptcy.
The Advantages of Filing for Bankruptcy
There are several advantages associated with filing for bankruptcy.
- Automatic stay. One of the most immediate benefits of filing for bankruptcy is the imposition of an automatic stay. This prohibits creditors from taking collection actions against you or your property, such as wage garnishments, foreclosures, and even collection lawsuits (U.S. Bankruptcy Code 11 U.S.C. §362). The automatic stay provides you with a temporary reprieve from the stress and anxiety caused by aggressive collection tactics.
- Discharge of debts. One of the main advantages of filing for bankruptcy is receiving a discharge of your eligible debts. A discharge formally relieves you of personal liability for certain debts, meaning you no longer have a legal obligation to pay them. This can provide a fresh financial start and help you begin rebuilding your credit.
- Retaining property. In many cases, individuals who file for bankruptcy are able to keep much of their property, such as a home, car, or personal belongings. Depending on the type of bankruptcy you file and your specific financial situation, there are exemptions that may protect your assets from liquidation.
- Improved credit over time. Although filing for bankruptcy will have an initial negative impact on your credit score, it can ultimately lead to an improvement in the long term. This is due to the elimination of debt and the opportunity to create better financial habits, including using credit wisely and making timely payments on all obligations.
- Relief from creditor harassment. Once you file for bankruptcy, creditors are required to cease all communications and collection efforts against you. This can provide a significant sense of relief and peace of mind for those who have been subjected to persistent and harassing phone calls or letters from creditors.
These are not the only benefits of filing for bankruptcy. Discuss your particular situation with a knowledgeable attorney to learn more.
The Disadvantages of Filing for Bankruptcy
There are also certain downsides associated with filing for bankruptcy.
- Damage to credit. A bankruptcy filing will have a negative impact on your credit score and will remain on your credit report for 7 to 10 years, depending on the type of bankruptcy you file. This could make it difficult to obtain new credit or loans and may lead to higher interest rates for any credit you are able to obtain.
- Loss of certain assets. While exemptions may allow you to retain some property in bankruptcy, it is possible that you may lose some non-exempt assets through liquidation. This could include vehicles, real estate, or other valuable possessions.
- Impact on future employment. Some employers may view a bankruptcy filing as a negative mark on your employment history or credit report. While it is illegal for employers to discriminate against job applicants solely based on bankruptcy, it may still be a factor considered during the hiring process.
Before making a decision to file for bankruptcy, consider speaking with an experienced attorney to discuss your particular situation.
Discuss Your Case with an Attorney
The decision to file for bankruptcy is a very personal one and should be made after careful consideration of the advantages and disadvantages. It is important to consult with an experienced bankruptcy attorney to discuss your specific financial situation and assess whether filing for bankruptcy is the best option for you.
Our bankruptcy attorney at the Law Offices of Melanie Tavare can help you navigate the complex bankruptcy process, protect your assets, and ultimately work toward securing your financial future. Call 510-255-4646 today to schedule a free case evaluation.