There are multiple ways to get out of debt, but perhaps one of the most appealing for some people is applying for bankruptcy. Of course, there are plenty of benefits to it, but filing this kind of financial state has some very serious implications you need to be aware of before making a choice.
While it can help you clear your debts and help you start afresh, this is a very big decision that can affect you for years to come. Today, we’re going to explore five of the pros and cons you need to think about, giving you everything you need to know on this page in order to make the decision that’s right for you.
The first positive is that you can easily clear and consolidate the debts that you have. This means you won’t need to be dealing with the stresses of your creditors, but rather just one organization or agency.
Some debts aren’t covered by bankruptcy and declaring it can have no effect financially but will still leave you needing to pay the original debts off in full. Some of these debts include student loans, back taxes, child support payments, and any government fines.
Not having to pay as much back as you own is perhaps the most common reason for bankruptcy being filed. This means your creditors will have to accept less than they originally intended, but you won’t have to pay as much back in the long-term.
Once bankruptcy has been filed, you can quickly start to lose valuable assets from your life, and this can leave you with nothing at the end. This includes property equity you may own, the value of possessions and, if you own a business, you may even lose employees and business assets.
Once the bankruptcy file has been set into place and discharged, this will then immediately ban your old creditors from contacting you in any way. This means you’ll stop receiving the calls and letters pestering you for money and can help relieve stress.
Maybe the biggest negative to applying for bankruptcy is the fact that it will stay on your record for many years to come. This can seriously affect your credit rating (in the worst possible way) and will affect everything from taking out a phone contract to applying for a mortgage.
You’ll be able to manage your money so much easier because you’ll know the exact amount of money you need to pay. When you’re repaying to creditors, it can be difficult to track how much you owe because of interest and changing monthly repayments, but this will be a fixed price.
Having filed for bankruptcy, you will be unable to hold the position for some certain kinds of job. Many of these are included in the public office sector and will depend on the country you’re in. However, in most countries, you
may not even be able to be a company director, unless the company is in your name.
It cannot affect your employee lifestyle when you file for bankruptcy. In the majority of countries in the world, it’s discrimination to fire someone or treat them differently in the workplace due to bankruptcy, so you can still return to work without the risk of being bullied or humiliated.
When your bankruptcy application is being processed, there will be a lot of attention on how your finances are being managed and the payments, tax, and processes you’ve been through in the past. This will make it far more likely than irregularities will be discovered. In the worst-case scenario, these may even leave you facing prison time.
While this isn’t a very extensive list, this does cover most of the basic pros and cons you’ll want to be thinking about when it comes to making an application for bankruptcy. Of course, each individual situation is different, but it’s so important you think about each side of the spectrum before making your decision.