Bankruptcy: Weighing Your Options

Filing for bankruptcy is never a decision to be taken lightly. But while making the decision to do so can be very overwhelming and scary, it’s important to understand that in many cases the positives of doing so outweigh the negatives. If you find yourself drowning in debt, bankruptcy may be the right to decision for you. Here’s what you should know when it comes to making the decision as to whether or not to file. 

Positives

When you are consumed by debt, it’s likely that many of your creditors and lenders are knocking on your door to get their money. But when you file for bankruptcy, it automatically triggers a stay, which basically prohibits these debt collectors from contacting you about their money. And those who still do can be penalized. 

Additionally, for those worried about property foreclosure or repossession of your vehicle or other assets, the automatic stay can help to delay these procedures. 

Chapter 7 Bankruptcy is usually the quickest when it comes to getting out of debt for the least amount of money. If you file for Chapter 7 bankruptcy, your assets may be liquidated, but your home and vehicle may still be exempt. 

Under Chapter 13 Bankruptcy, the court trustee will establish a repayment plan for how you can repay your creditors. When your creditors aren’t willing to negotiate or settle at all, Chapter 13 is a good option. Chapter 13 essentially leaves the outcome to the courts, which may decide that the collector is adding additional charges that they will be ordered to drop. 

Also, even if all of your debts are not discharged through filing bankruptcy, a lot of what you owe will be, which can help to take a lot of stress off of you.

What Should You File? 

Most people who file for bankruptcy prefer Chapter 7, as it is usually easier and quicker. Plus, it allows you to start over with a completely clean slate. (Those who file for Chapter 7 usually don’t lose assets since the value of the assets they have isn’t a lot and therefore qualifies for an exemption. 

Therefore it goes that if you make too much money when compared with the median poverty level, you may not qualify to file for Chapter 7 and would have to file for Chapter 13 instead. 

Downsides to Filing for Bankruptcy

As with anything in life, there are negatives as well to filing for bankruptcy. They include the following:

1. It Will Affect Your Credit Score

The bad news: filing for bankruptcy will negatively impact your credit score. The good news: the negative remark on your credit score isn’t forever. It will remain for about 10 years from the date of final discharge for Chapter 7 and 7 years from the date of final discharge for Chapter 13. It’s also important to note that there are things that you can do during this time to rebuild your credit. 

2. All Debts May Not Be Discharged

As mentioned, some debts may not be discharged. This includes things like tax debt and back child support. Although some people believe that student loan debt can’t be discharged, that’s not always the case. 

3. Finding Financing May Be Difficulty Temporarily

After you file for bankruptcy it’s extremely likely that you will have a more difficult time qualifying for traditional credit cards or prime loans. However, there are still other options such as secured credit cards and you can work to build your credit back up. It’s also important to note that receiving credit is usually easier under Chapter 7 than Chapter 13. 

4. Co-signers and Guarantors Are Still On the Hook

Filing for bankruptcy may alleviate some debt, but for your co-signers or guarantors, it leaves them on the hook. Creditors eager to receive the remaining balance can still pursue these individuals. That’s why it’s always best to talk to any co-signers prior to making this decision. 

Toronjo & Prosser Law Helps Those Who Are Dealing with Bankruptcy 

It’s undoubtedly stressful to realize that you don’t have enough money, and even more stressful when you realize that filing for bankruptcy may be your best option. That’s why it’s so important to consult with a knowledgeable and experienced Dallas bankruptcy attorney. At Toronjo & Prosser, our qualified Texas Bankruptcy Attorneys can help you to navigate the process. To learn more or to schedule a free consultation contact us online or call us today!