Personal Bankruptcy Questions

Few things can be as stressful to a family as trouble with their finances.  Unfortunately, struggling with excessive debt has almost become a staple of American life, at least for many families throughout the nation.  While there are a variety of options to pay off debt, each has its advantages and disadvantages.  This is just as true of bankruptcy as it is of any other form of debt relief.

What exactly are the pros and cons of declaring bankruptcy?  Well, bankruptcy can provide much needed relief to a family buried under a mountain of bills which they struggle to pay each and every month.  Chapter seven bankruptcy in particular is the kind that most people think about when they hear the term bankruptcy and is designed to permanently eliminate the most common forms of debts.

One major drawback is that you’ll have to liquidate assets in order to pay off as much of your debt as possible.  Fortunately (or unfortunately, depending on your perspective), most people who declare personal bankruptcy do not have many assets to speak of.  If they own a house or have retirement funds, these assets are often (but not always) off limits to their creditors.

Chapter 13 bankruptcy is the other major form of bankruptcy that a family might consider.  Instead of doing away with your debt completely, you agree to a repayment plan for the next 3 to 5 years.  This may not sound like a very attractive offer, but it can be very helpful in some situations like when you’re behind on your mortgage payments and don’t want to lose your house.

The advantage of chapter 13 is that you don’t have to give up any assets.  Also, the effect on your credit report will be a little less severe as the bankruptcy won’t stay on your record quite as long as the chapter 7 would have.  This makes sense because your creditors end up getting part or all of their money through monthly payment plans.

As we said before, there are pros and cons to each alternative when it comes to debt relief, and you should discuss these options thoroughly with a lawyer before making a final decision.  Just as you need to consider all aspects of bankruptcy, you need to weigh the pros and cons of avoiding bankruptcy .