Far too many people know the sinking feeling that comes at the end of a month with too many bills and not enough paycheck.
In fact, 78% of American workers live paycheck to paycheck.
At least they’re making ends meet right? But what if there’s an emergency? What if your child needs braces or your car breaks down?
The problem with living paycheck to paycheck is that you’re constantly living on the edge.
What do you do when the tides change and you are no longer making ends meet?
Do you file for bankruptcy? Or is that a bad idea?
Keep reading for the pros and cons of bankruptcy.
There are many pros and cons of bankruptcy, but remember, not everything is going to be smooth and easy. Bankruptcy should never be an impulsive decision.
There are places that offer free legal advice to help you decide if you should file bankruptcy or not.
However, if you find yourself in that position, here are the pros.
If anything, filing for bankruptcy can relieve a tremendous amount of stress. One of the biggest causes of debt is credit cards.
A benefit of filing bankruptcy is the relief from creditors and debt collectors.
The calls stop and they can no longer legally pursue you until things have been settled.
Filing for bankruptcy will help dissolve your debt. However, while it’s possible to be granted total debt forgiveness, it’s not entirely common.
Most often, debt settlement is achieved through liquidation of assets or through a prolonged payment plan. Regardless, you’re most likely going to be paying back less than what is owed.
When you file for bankruptcy, the court will appoint a trustee on your behalf. This person will help you every step of the way, including being the buffer between you and your creditors.
As stated above, the pros and cons of bankruptcy run both ways. While filing for it may be the best decision of your life, it does come with some negative consequences.
Loss of Assets
When filing for bankruptcy, know that the most common type is a chapter 7 bankruptcy. In this version, you are forced to liquidate your assets of value, and you don’t always get to keep them.
Additionally, if you own a business, you may lose temporary control or permanent possession of it.
It’s Not a One-and-Done
When weighing the pros and cons of bankruptcy, realize that it’s not necessarily a fix-all to your problems.
In most cases, your debt doesn’t just go away.
In a chapter 13 bankruptcy, a payment plan is set up to settle some or all of your debt, depending on what your situation qualifies for.
The Long Haul
Filing for bankruptcy means you’re in it for the long haul, both in processing and in consequences.
First, the process of bankruptcy can take months or years to complete.
Second, filing for bankruptcy stays on your record for a long time. In many situations such as applying for a loan, renting an apartment, registering for insurance, buying a car, and applying for jobs, they ask you if you have ever filed for bankruptcy.
When weighing the pros and cons of bankruptcy, know it will affect your life for years to come.
The Pros and Cons of Bankruptcy, Should You Do It?
In this article, we have only brushed the surface of the pros and cons of bankruptcy.
As stated above, if bankruptcy is on the table, make sure it’s a well thought-out decision. Talk to the experts. Get legal advice.
Know your options.
For more article and information on personal finance, check out our blog.