What are the advantages and disadvantages of filing bankruptcy?
Is filing worth it? This is probably the most common question I receive as a bankruptcy attorney. Unfortunately, most of the time when a client has felt the pressure of debt to the point that he or she is considering bankruptcy, there are often few other good options or alternatives. Most families today operate their households very close to the edge, living paycheck to paycheck. For those individuals and families that find simply paying the minimum to service their debt impacts their ability to afford the basic necessities for themselves and their family, bankruptcy should be considered. In fact, putting off dealing with debt under those circumstances will only serve to calls greater physical stress, emotional strain on the family, and increased anxiety.
There are pros and cons to filing for bankruptcy.
The most obvious advantage to filing bankruptcy is the imposition of the automatic stay and the elimination of debt. Upon filing a bankruptcy case, all creditors are barred by the automatic stay from continuing or initiating collection efforts, calls, lawsuits, foreclosures and garnishments. Ultimately if the case is successful, many common debts will be discharged or wiped out by the bankruptcy. Clients who file bankruptcy are also able to start re-building their credit as soon the case is complete.
The most significant disadvantage of filing bankruptcy is that some clients may lose assets or property if those items are not properly protected by exemptions. Another downside, of course, is that bankruptcy will remain on your credit report for up to 10 years. Although not necessarily a negative, most credit card companies will cancel any account upon receiving notice of the bankruptcy.
What will happen if I declare bankruptcy?
The filing of a petition with the Bankruptcy Court starts the process of a bankruptcy case. Upon the filing of the Chapter 7 or Chapter 13 petition, a trustee is appointed to oversee much of the administration of your case. The automatic stay immediately goes into effect and protects the bankruptcy filer from all collection actions unless that individual has filed multiple cases in the past. A meeting of creditors is scheduled typically 3 to 6 weeks after the case is filed. At that meeting you will be placed under oath by a trustee who will ask you questions about your income and assets. Other creditors and interested parties may also appear and ask questions as well.
Is it better to file a Chapter 7 or Chapter 13 bankruptcy?
Deciding the best chapter of bankruptcy depends entirely on a client’s income and assets. Chapter 7 is an attractive option to many if they qualify and are able to protect all of their assets. Chapter 7 cases usually take the least amount of time, lasting typically under six months if nonexempt or unprotected assets are not involved. Chapter 13, however, offers even greater relief in that the chapter 13 discharge eliminates more debt than a chapter 7. Chapter 13 can also be a particularly powerful tool in that it enables a client to stop a foreclosure and reinstate the mortgage.
Ultimately, deciding whether to file a bankruptcy and choosing the right chapter of bankruptcy to pursue requires a careful review of your circumstances with a qualified, experienced bankruptcy attorney. At Cox Law Group, our firm is 100% dedicated to representing individuals and families going through the bankruptcy process. Let us help you. It’s all we do!