Bankruptcy is not a get out of jail free card

On Behalf of | Dec 24, 2020 | Uncategorized

If you pull out the Monopoly board this Christmas, there is a good chance you will end up owing the bank money and have to watch as it takes away all of your property. For some of you, this may ring a little too close to home. The added expenses the holiday season push many people to the point where bankruptcy can seem like the only option. However, bankruptcy does have some disadvantages.

Why should you consider alternative options before choosing bankruptcy?

Filing for Chapter 7 or Chapter 13 bankruptcy may be the best answer to your problems. Yet neither will solve all of your financial problems. These are three of the downsides of filing for bankruptcy:

  • It harms your credit rating: The next time you need a loan, you may be turned down or have to pay higher interest rates. A Chapter 7 filing stays on your credit score for ten years, and Chapter 13 for seven years.
  • You may lose assets: Watching the bank claim your assets is hard enough when it is a game. It will be much worse in real life. While Chapter 13 gives you more chance of keeping assets than Chapter 7, many people fail to meet the repayment schedule and end up resorting to Chapter 7 later.
  • It could still leave you struggling to pay debts: Unlike in Monopoly, you cannot walk away and forget about your problems. Neither Chapter 7 nor 13 will remove all debts. You may still have to pay outstanding tax bills, child support payments or student loans.

In the real world, not everyone is out to beat you, and you do not have to make decisions alone. You can seek legal advice to help you decide whether bankruptcy is your best option or whether you should seek alternative forms of debt relief. An experienced attorney can discuss your options with you.