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 from the Internet. 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.
{ 21 comments… read them below or add one }
After reading this post I concluded that even the darkest of the cloud has its silver linning. Even the worst situation like bankruptcy can also have a number of pros on its side. I loved this share. Thanks for throwing light on this aspect.
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In our country a person who files for bankruptcy has further issues. They are reported with financial institutions not only to ensure that there is no further lending but also to ensure they do not get a job there.
This is a great post! It gives me an idea on managing my financial statement. I absolutely agree on your ways and means on how to get financial help through bankruptcy. Thanks a lot.
Belen B. Hermosa recently posted..What are my options to pay off a debt?
Bankruptcy is awful. But hey, it’s nice to know that help can be on its way when we need it.Though I wish no one will be bankrupt.
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Yes, there are positive and downside with bankcruptcy. But I think that we have to go through it with positive attitude. Let\’s stay to what will save the business and our efforts no matter what. 🙂
How nice to nice to know that bankruptcy can no longer be that scary and people can start to feel comfortable in entering business. This is indeed a great help. Thanks!
Nice to know declaring bankcruptcy is no longer that heavy. It still has the shame factor though, but it happens to everyone. Nothing new to business people, which is why i agree that we must be tough through it all and do what we still can for the business.
Yes – I believe there are always underlying issues when the “symptom” of bankruptcy surfaces. Money management really needs to be learned early on. NOT to say it cannot be a skill honed later in life…but take any other issue…harder to teach the old dog new tricks.
Too many people in my circles have taken the “easy” way out here only to find their lives are not any easier the second time they try to file.
Hi Chris,
As you have correctly mentioned, bankruptcy definitely hurts one’s credit. But, in case it is unavoidable, one has to file it. Now, this involves a complete process which many are not aware about. Apart from the step-wise process, it is also wise enough to hire a bankruptcy attorney.
When the economy went down the tubes and more and more people found themselves unable to make ends meet, the stigma of bankruptcy lessened greatly. I’ve always found it interesting how some companies plan their businesses around bankruptcy without any shame (Donald Trump is notorious) and yet individuals are judged differently for their (usually) one-time experience.
The benefits of bankruptcy are overshadowed by it’s reputation. No-one wants to have to say they’re facing bankruptcy but like you say, it’s a fresh start. A change to get your life back in order and credit scores do improve over time.
Don’t get me wrong, there are other options to consider before bankruptcy, but if this is your final option don’t worry too much. Think long term and how much better life might be down the line.
Thanks for this information. I’m wondering if bankruptcy is for me and I’m leaning towards “no” after reading the entry and subsequent comments. I’ve amassed $25k in credit card after losing my job a few years ago. And I also have about $30k in grad school student loans. My credit score is in the mid 700’s and I am wondering how big of a hit I could take if I did file for bankruptcy. I would like to wipe all of this debt away with income from a full time job, but it has been really hard to do that and I am not sure when I will be employed again. I welcome any tips that you have to share.
I was recently reminded by another article that one of the most important positive factors of bankruptcy is the emotional relief. Nearly all debtors have overwhelming stress before bankruptcy, and nearly all debtors have a huge weight lifted from their shoulders once their credit card and medical debt has been discharged.
Adam Garcia recently posted..Answers to some legal bankruptcy questions that might confuse you
I have been a personal bankruptcy lawyer for over 20 years and in my experience people file bankruptcy less for financial reasons and more for peace of mind. Even a few months of fighting to hit break even can negatively impact one’s health and quality of life. Sales people in particular give off a vibe of desperation which makes closing even less likely.
I would say that if you find yourself talking to a bankruptcy lawyer, everything needs to be on the table – be prepared to walk away from your house, your car, your furniture – whatever it takes to put your budget in the black and to jettison wants for needs. Your credit will recover (more quickly than you think) and there is no social stigma anymore. While I agree that bankruptcy should be seen as a last resort, it is also a viable financial tool that can change for the better everything about your life.
Jonathan Ginsberg recently posted..Your Decision to File Bankruptcy Should Reflect Business Considerations Only
This is a great comment to supplement this informative blog post. You two give people great hope in recovering their credit and great tools to change their spending habits to start rebuilding their financial life. My wife had to go through a chapter 13 almost 10 years ago and her credit is now improved significantly after a little spending training(from her loving husband^_~). Keep up the great blogging!
Great work Chris. Somehow it feels good knowing that bankruptcy has positive effects too! And on the brighter side, bankruptcy is indeed a fresh start of something new. Good financial management and effective budgeting should be developed to keep credits away and to avoid another bankruptcy in the future.
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Yes. I agree with this article. Bankruptcy is a legal process in which a person can file if they having problem about their financial status.
This is a great post knowing that still bankruptcy is a best option for the more problem in financial matter. Learn about the personal bankruptcy rules before petitioning. Your case may be rife with issues due to pitfalls inherent in codes regarding personal bankruptcy. If you commit severe mistakes, your bankruptcy could be dismissed. It is important to learn the bankruptcy code before filing bankruptcy. This will ensure your bankruptcy will go smoothly.
I believe that getting help is critical during bankruptcy. And while your focus may be on getting debt relief or getting out of the mess as quickly as possible, it is also very important that you do a thorough check to pinpoint why you went bankrupt in the first place.
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Yes i agree with pros and cons but end of the day what is important is whether you’re saved with what you want to be or your bankrupt totally. It upto you to decide and have a wise decision on whether or not to have a bankruptcy attorney.
I guess I never actually thought about a positive side to bankruptcy, I suppose that those are some very valid points, however it’s definitely not a situation I ever want to be in, ever.