The Pros and Cons of Declaring Bankruptcy

When you find yourself struggling under a mountain of bills that you cannot pay, you may think that there is little good news or no hope for your situation. However, bankruptcy may give you an avenue to pursue relief from these debts. There are reasons why you may consider filing for bankruptcy, although there is nothing that comes without its own cost. An experienced bankruptcy lawyer can review your situation and help determine whether this process can help you. 

You Can Qualify for a Fresh Financial Start

Perhaps the most compelling reason why you would declare bankruptcy is that you could qualify for a fresh financial start, free of the debt that has weighed you down for so long. There is a pathway to the discharge of your debt under both primary types of bankruptcy. Specifically, you may qualify for discharge of unsecured loans, such as medical debt and credit card bills. When you emerge from bankruptcy, you no longer have to pay this money back.

The Phone Calls From Creditors Will Stop

When you file for any type of bankruptcy, there is something known as the “automatic stay,” which immediately goes into effect. The automatic stay means that a creditor cannot take any steps to collect upon the debt that you owe through any form of communication. Everything is frozen in place from the moment you declare bankruptcy, and it remains that way until you receive the debt discharge or agree to a payment for the money that you owe. 

You Can Begin to Rebuild Your Credit

The fact that you are behind on your debts means that there are negative entries on your credit report that keep you from qualifying for new loans. Once you have completed the bankruptcy process, you can begin taking steps to improve your credit. Eventually, you can slowly obtain new loans that allow you to build a repayment history. To be clear, bankruptcy will remain on your record for seven years, and it will be something that creditors can see. However, the effect of the bankruptcy will eventually lessen and then go away entirely.

You Must Surrender Some of Your Assets

If you have declared Chapter 7 bankruptcy, there are trade-offs for the debt discharge that you would eventually receive. Arkansas law allows you to protect some, but not all, of your assets from creditors in the bankruptcy process. The law does require you to surrender “non-exempt” assets to the trustee. Then, the trustee would sell these assets and use the money to pay back your creditors to the fullest extent possible. You may not be able to keep all of your assets because exemptions do not cover everything.

There Is a Stigma Associated With Bankruptcy

When you file for bankruptcy, there is a publicly available record of the proceedings. In other words, it is easy for others to know that you have availed yourself of these protections. You may be afraid of your reputation, and you do not want others to have the knowledge that you were in financial distress. Still, this may be a small price to pay for the relief that goes along with filing for bankruptcy. 

Bankruptcy Can Complicate Future Prospects

The fact that there is a stigma associated with bankruptcy could affect you in other ways. For example, you may be subject to a credit check when you apply for a job. Certain positions may rely on you to have financial management abilities. Future employers could be scared by the fact that you found yourself in financial distress. At a minimum, you may have to explain the reason why you ended up in bankruptcy. 

Contact a Fayetteville Bankruptcy Lawyer at Wilmoth Law Firm if You Have Questions About the Bankruptcy Process

If you find yourself experiencing persistent financial difficulties without much hope of emerging from them, speak to a Fayetteville bankruptcy lawyer at Wilmoth Law Firm to learn whether this course of action may benefit your situation. To schedule a free consultation, submit the provided online form or call today at 479-443-8080. Located in Fayetteville, Arkansas, we gladly serve clients in the surrounding areas.