Financial help is something almost every person needs once or twice in their lifetime. If you’re lucky, the type of help you’ll need will be finding money to finish college or a family loan to help you buy your first home. Unfortunately, for many people, financial woes get much worse, often ending in bankruptcy.
While I haven’t experienced bankruptcy personally, I’ve seen friends and colleagues have to suffer through the pain. The good news is that bankruptcy isn’t always bad. In fact, I’m going to point out some of the pros and cons of bankruptcy in case you were wondering how bankruptcy can actually provide financial help.
Cons of Getting Bankruptcy Help
Let’s start with the negatives. The fist big negative is that bankruptcy will hurt your credit. By getting debt relief in this fashion you typically get your debt slashed into a fraction of what it used to be. That means your creditors will note that on your credit report. And those bad marks will last 7 to 10 years before you can start rebuilding your credit.
Second, bankruptcy is sometimes only the symptom and not the solution. For many, bad money management skills and years of overspending can lead to the financial trouble that bankruptcy helps. If those skills are not fixed, and lifestyle choices are not corrected, there’s a good chance that you could find yourself back in the same situation a few years from now.
Third, bankruptcy has a lot of out of pocket expenses. Besides the cost of lawyers, court fees and large amounts of filing expenses, bankruptcy takes up a lot of time. Between court dates, meeting with counselors, and sorting through and organizing your current financial documents, there is a big time commitment to also account for.
Now let’s turn to some of the positives.
Pros of Bankruptcy Help
First of all, even though bankruptcy will hurt your credit, your credit has probably already suffered for several years. Furthermore, if you have outstanding debt issues, your credit report will get hurt each time a new collection agency updates the file. That means that instead of lasting for only about 7 years from bankruptcy, your credit could actually be impacted for a longer period without bankruptcy.
Second, and biggest of all, it can provide loads of debt relief. The court will likely approve a bankruptcy plan that allows you enough wiggle room to pay all of your bills and get your finances back in order.
Finally, you can get a fresh start. If you were seeking financial help because of an event that was out of your control, this gives you a chance to clear it from your finances and start fresh. A fresh start is perhaps the biggest motivator for most people.
If you are looking to learn more about bankruptcy, I suggest you do some reading about the different products and solutions that people offer. You should check out law firms, debt counselors, and even read advice found on websites like LegalZoom Reviews. And don’t overlook free resources like local credit counselors, social workers, and of course your local public library. Just make sure the information you find is up to date with the most recent laws.
If you do your research, understand how the process works, and find competent bankruptcy help, you should be able to come out of it in a much better financial situation than how you entered.
And if you’re really motivated, you can even look into doing it all yourself.
To see what the government has to say about bankruptcy, a great starting point is to read their information on what to know before you file for bankruptcy.
If you have any experience or advice, feel free to share it through a comment.