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Pros and Cons of Filing Bankruptcy

by Muzamil Khan
overhead debts

Having overhead debts is frightening. Fortunately, many kinds of help are available to get out of massive debt. In addition to this, bankruptcy is one of the alternatives to getting debt relief. Generally, bankruptcy is a legal process that helps you to get a fresh financial start when you are in a certain financial problem that you can’t repay your debts. While this option can alleviate an excessive financial burden, filing for bankruptcy has pros and cons. Despite that, filing for bankruptcy is a very personal decision. Furthermore, you can find a debt settlement company for help with alternatives to see if they will work first. The following is a list of benefits and drawbacks you need to consider before filing for bankruptcy.

Pros of Filing for Bankruptcy:

Going bankrupt may sound negative, but some pros could come from it. When you want a chance to get a fresh start, you may feel more prepared to tackle your money better than you did before. Here is a list of some pros of filing for bankruptcy.

Discharging Your Debt:

Bankruptcy is primarily filed for discharging debts. Undeniably, it is very hard to improve your financial health when debts get out of control. However, you can discharge several debts that allow you to start over and make better financial decisions. When you discharge a debt, it is completely removed, and you don’t need to pay it. Unfortunately, some types of debts can’t be removed. On the other hand, several types of debts can be forgiven, like credit card debt and medical debt.

Settle your Debts at Less Than you Owe:

Your creditors will force you to accept whatever payment is figured out in your bankruptcy case, which sometimes means getting no payment. If you qualify for Chapter 7 bankruptcy, you could have all your unsecured debts removed, such as personal loans, credit card debts, and medical bills. On the other hand, Chapter 13 bankruptcy can be tricky. It is because you may have to repay some of those debts within three to five years.

You May Get to Keep your Property:

There are few personal exemptions when you file for bankruptcy to keep assets like your retirement accounts, car, or home in either Chapter 7 or Chapter 13 bankruptcy filing. However, the exact exemptions are based on the state laws where you live. Additionally, it also depends on the value of your assets. Therefore, it is better to consult a professional if you are unsure what property may be at risk. Moreover, some assets may be protected in certain circumstances. Usually, a Chapter 13 bankruptcy filing is the safest option if you are a homeowner or have other major assets.

The Automatic Stay:

Bankruptcy put into place is called the automatic stay. It prevents any of your current creditors from collecting on their debts. It will include all forms of contact. So, your creditors can no longer contact you for debt collection once the automatic stay is in place. While you want to resolve your financial issues, it will protect you from creditors. Moreover, an automatic bankruptcy stay may also protect your home from being foreclosed upon during the bankruptcy process and halt current court cases against you.

Cons of Bankruptcy:

Under the right situations, Bankruptcy can be beneficial. However, it is also important to understand the cons of filing for bankruptcy. Here is a list of some drawbacks of filing for bankruptcy.

  • Filing for Bankruptcy can remain on your credit record for a few years, affecting your future finances.
  • It may impede your chances of getting a mortgage or car loan for some time.
  • Not all debt will be removed.
  • Many people reflect on the horrible emotional burden of filing.
  • “Have you ever filed bankruptcy” can be asked for the rest of your life.


Filing Bankruptcy is a legal process that may or may not be the perfect solution for your financial issues. Depending on your circumstances, your debts and how much property you need to protect are some important considerations before filing for Bankruptcy. In addition, consider the pros and cons of filing bankruptcy. Apart from this, an experienced attorney must be hired if you are considering filing for bankruptcy.

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