Understanding Bankruptcy

Bankruptcy has become quite the buzzword around the internet for those with bad credit, and while it can be something to consider, there are definitely some things that you should know first. There are definitely pros and cons to bankruptcy, but what you need to understand about it is that it is a last resort, for people that are drowning in debt and have no other way out. First, let’s explore what bankruptcy actually is, and then go over the pros and cons of filing for military personnel. If you want to know about military lending and other credit topics visit www.usmilitarylendinggroup.com.

What is Bankruptcy

There are two main sections of bankruptcy law that are available to consumers regarding their debt. Chapter 7 bankruptcy liquidates your assets to that your debt can be repaid, and the court will determine whether you will owe some or all of your debt. Chapter 13 is the more common type of bankruptcy, falling under the reorganization type of bankruptcy, and it allows consumers to keep their property, but they must make monthly payments on the debt that the court does not remove from their debt portfolio.

Pros & Cons of Bankruptcy

There are both advantages and disadvantages to filing bankruptcy. Whether or not you decide to file is something that should be discussed with your attorney and spouse with all of the options carefully considered. Let’s explore some of the pros and cons of filing.

Pros:

When you file bankruptcy, you will no longer be hounded by creditors. They cannot, by law, demand payment once you have filed. That includes everything from foreclosures, repossessions, wage garnishments and threatening letters and phone calls. If you have used an attorney he or she will handle the calls from creditors.

Most of the time, you will be allowed to keep your home, car and some other essential items when you file. However, this differs from state to state, so make sure you check with your attorney.

If you are truly in a bad situation, declaring bankruptcy can give you a fresh start and allow you to begin rebuilding your credit and changing your life.

You will not be able to charge off students loans in a bankruptcy, but you will not receive as many phone calls or experience hounding by collection agencies because of it.

Cons:

Your going to lose your credit cards, except for any that you have paid off completely before you file bankruptcy. You also may have to give up, or liquidate some of your luxury items, depending upon your state laws. However, this can be turned into a positive because you will no longer be worrying about making payments on all your credit reports and other items every month.

If you have a recent bankruptcy you probably aren’t going to get a mortgage, but assuming that you work out your credit problems, you should be able to get approved for one within 5–7 years.

Unlike debt that has been charged off, a bankruptcy stays on your credit report for about ten years. This can make it difficult to get approved for credit, because lenders will not be willing to extend you credit with a bankruptcy. However, after a few years, you may find that this problem diminishes.

Should You File Bankruptcy?

Bankruptcy wounds your pride and makes it embarrassing to look those in the eye who have seen your credit report, but repossessions, foreclosures and debt collection can be just as embarrassing. Also, even though your name will be listed in court reports and may even appear in the newspaper’s legal section, hardly anyone reads that stuff anyway, and if you get sued by a creditor the same thing could happen. It can be a difficult decision to make as to whether or not to file bankruptcy and there are definitely factors to consider on both sides. However, the most important thing that you have to ask yourself when your considering it, is whether you can get out of the financial mess that you are in without filing bankruptcy. If you can, then you definitely should, because as mentioned, bankruptcy is the last resort for those who have nowhere else to turn to get out of debt.